Challenge of a lifetime! 18 September 2012 at 8:29PM edited 18 September 2012 at 8:51PM in Mortgage-free wannabe 266 replies 29.5K views

cotswoldaccountant

I've been following Tilly's mortgage-free diary and one or two others for several months, and have decided that now is the time to start my own. Deep breath...

OH and I are in our 30s - OH has his own business, and I'm an accountant with my own very small practice.

We moved to our £675k house five years ago, with a mortgage of £570k. Buying this house was the hardest decision we have ever made, and we had sleepless nights for months once we'd moved in, wondering if we would be able to sustain the £3600 per month mortgage payments. We love our rambling, quirky home though, and the move has definitely been worthwhile once the initial shock subsided!

Knowing that we did not want to be saddled with this ridiculous debt for 25 years, we immediately decided that we would have to overpay to reduce the mortgage - wherever and whenever possible. Through a lot of hard work, we have managed to reduce the balance to £405k over the past 5 years.

31st December 2012 will mark a huge milestone in our mortgage free journey. We will finally come to the end of our five year, 5.99% fixed rate mortgage and can change provider - we have been accepted for a split mortgage with another provider - £200k offset at 3.39% and £200k fixed at 3.19%. The reduction in interest payments alone will save us nearly £1000 per month - all of which will be overpaid.

We are fortunate that OH earns a good income from his business, which we top up with my accountancy earnings, income from a property we rent out and one (soon to be two) lodgers in our home. Every penny counts though, and I'm sure there are many savings to be made in our day to day lives, which I hope through this diary I will be able to achieve.

Our target is to overpay by £4000 per month, which should clear our mortgage by October 2018. This will require us to be totally committed to our mortgage free goal, and by starting a diary, I am hoping to be able to record our progress and encourage us on our challenge of a lifetime!

CA

whitewing

Hello. This looks interesting. Would you be able to set up a signature so we can easily see how things are progressing?

cotswoldaccountant

I will try! Totally new to this forum but I will have a go now - thanks Whitewing!

CA

Tilly_MFW_in_6_YRS

Hi CA, good luck on your travels. You will really see the mortgage drop with your OPs. I used to track so many different things but made the decision to leave it to FD now. They have been fab and I won't worry about anything except OPs.

I LOVE having lodger/s and find dinners in the week, tend to be like an extended family meal.

Keep the focus on maximising your DI and then the OPs can be made with less worry. It's rather like a black cloud at times having this debt, and we will all understand the highs and lows. The amounts don't really matter in my opinion as it is all relative.

Hope the switch goes well. When we moved our daily interest dropped by over half :j:j:j

Best wishes Tilly x

cotswoldaccountant

OK signature hopefully set up!

I love having lodgers around the house too Tilly - ours tend to cook for themselves rather than eat with us (our children are fairly small and dinner is at 5 in our house, earlier than lodgers are usually home from work!) but it is always nice to have a catch up with them during the week. We've had lodgers most of the time over the past 5 years and have rarely encountered any problems. I think it makes us more laid back as a family, and far more tolerant of others.

Matt_The_Chippy

Wow, thats some scary numbers you have there! Well can't be so bad if you're earning well, which you sound like you are. Good luck with it and enjoy seeing the capital falling.

HelenDaveKids

Good luck, sounds like you have a clear action plan.

whitewing

Do you have sufficient life etc insurance should the worse come to the worse?

It may be very difficult to keep on top of everything if something drastic happened.

pixelwife

I just wanted to let you know you're not alone with a telephone number mortgage. Just take a look at my signature for something truly terrifying. Our house repayments are £3772 per month and then 2 of my 3 other properties also have mortgages so our outgoings on mortgage payments alone are around £6000 a month.

It is scary, but it can be done. It's just the same principle of compound interest working for or against you. Pay anything you can against it and more of your money will hit the capital rather than disappearing into the bank's pocket.

Our house will be paid off in 10 years if we don't overpay but as it has the lowest interest rate by a country mile, we're paying off our BTLs as priority. Still, aiming to be mortgage free as soon as possible, ideally in just under 5 years. I have no idea how we'll accomplish that, but you have to aim high!

Good luck. I've subscribed to your diary so I shall keep an eye on your progress.

cotswoldaccountant

Whitewing - yes, plenty of life insurance etc here, but one of my first priorities is to review our insurance policies to make sure they are still appropriate for our needs. The first is a decreasing term assurance policy, which pays off the mortgage in the event of either of our deaths. I realised the other day that the insurance assumes that the mortgage is paid off over 25 years, so when I called them they expected the current balance to be over £500k, whereas actually it is nearer £400k. We had been paying £26 a month for this policy, and it has now gone down to £19 as of this month! A nice £7 a month saving which will of course be overpaid.

The other two policies cost £61 and £38 a month each, so I definitely need to review these to see if we can save money on them. I can't even remember exactly what we get with them - I think one is some kind of critical illness policy, and the other gives us both a lump sum and monthly income in the event of death, so these are top of my list to review!

Pixelwife - I am so pleased that I am not alone with a terrifyingly large mortgage. Three buy to let properties must keep you busy! Presumably you take the tax saving into account when you are working out which mortgage you should pay off first - that's a big difference in rates if the buy to lets still come out as more expensive. But absolutely makes sense to pay off the most expensive mortgage first. I totally agree about aiming high. Our 6 year target is ridiculously ambitious, but if we don't go for it, then the timings will easily slip. Another reason for writing this diary, to keep myself on track.

Mortgage_Reduction_Novice

Hi Cotswoldaccountant,

I'm thinking yours is more of a mortgage free wannabe mansion! Good luck!