Is anyone else aiming to be MF before age 40?

Lois_E

YoungBusinessman wrote: »

Sorry it's quite late and I am off on holiday, for interest paid out of repayment is it just the rate you pay on the balance of mortgage is the interest for a year?

So I owe £100k at 4.89% so I pay £4890 interest in first year?! Would that be right? Almost £100 a week.

Well, it would be if it were IO. If you're on a repayment mortgage, then you'll be paying 1/12 of £4890 in the first month, but slightly less each month after that, as your capital repayments begin to bring the balance down. (That's assuming that your interest is calculated daily and compounded monthly, as most (but not all) mortgages are.)

QB_Wolf wrote: »

As I turned 38 last Sunday, I think it's fairly unlikely that I'll be mortgage free by 40.

Never mind. :rotfl:

Unlikely, but not impossible. You might win the lottery. Or inherit a few hundred thousand from a doting elderly relative. Or get injured at work and receive a massive compensation payout. Or get unfairly dismissed and get £££ from a tribunal. Or die, after which your partner pays off the whole thing with your life insurance. Or something. (Not that I am wishing any of those for you other than the first one and maybe the second, if the relative was very old and ill and their time had come.) For me, though, it would take a time machine to be MF by 40. Anybody got a handy flux capacitor?

PS Would anybody under 40 even recognise the reference to the flux capacitor????

QB_Wolf

Lois_E wrote: »

Unlikely, but not impossible. You might win the lottery. Or inherit a few hundred thousand from a doting elderly relative. Or get injured at work and receive a massive compensation payout. Or get unfairly dismissed and get £££ from a tribunal. Or die, after which your partner pays off the whole thing with your life insurance.

Mmm that's a cheerful thought.:rotfl:

Lottery seems like the best option.

Lois_E

QB_Wolf wrote: »

Mmm that's a cheerful thought.:rotfl:

Lottery seems like the best option.

Well, I did say I wasn't wishing for the others for you....

Here's hoping for the lottery win then.

racing_blue

Cornucopia wrote: »

The typical person pays as much for their mortgage as they do for their house.

Therefore, getting to mortgage-free status early reduces that cost

I agree with your fine sentiment Cornucopia. What I'm debating is the wisdom of paying off a mortgage really quickly, only to get another mortgage on a bigger house. I think it often makes more sense to go straight for the bigger house.

Apologies for all the numbers that follow but I think I'll need to show workings to make this point.

Imagine a world where house prices rise by a steady 3% per year and mortgage rates are 5% per year- I accept that this gives a crude model and real life is different. But just for the sake of argument, hear me out...

Fifteen years ago in this world, family A bought a small house with a small mortgage (house £100k/ mortgage £50k), overpaid by £10k per year and after 5 years were mortgage free. They then bought a medium sized house with a small mortgage (£166k/£50k), overpaid by £10k per year and after another 5 years were mortgage free. They then bought their current, large house with a small mortgage (£242k/£50k), overpaid by £10k per year and after another 5 years are mortgage free in a house worth £280k.

Family B went straight for the large house, with a large mortgage. It is worth £280k now, but 15 years ago it cost them £180k. Their mortgage was £130k. They overpaid by £10k per year too, and so have been mortgage free for the last couple of years.

Which family has paid the most for their house?

If you feed these numbers into a spreadsheet you'll find that both families paid about the same- £223K and £225k respectively. Family A paid £50K initial deposit, £150k in principal and £23k in interest. Family B paid £50k deposit, £130K in principal and £45k in interest. However, family B lived in a large house for the whole time, and saved the expense and hassle of 2 house moves!

Lois_E

Getting to your final position on the ladder is always most cheaply done by using the fewest number of steps to get there, I agree, racing blue. However, not everyone can afford to go straight for the big house, and not everyone has the temperament (or the financial security) for the risk involved in taking on a huge debt right at the beginning. For some people, taking a larger number of smaller steps up the ladder makes more sense.

Cornucopia

I agree. The nature of affordability tests/income multiples is such that someone may not be eligible for the "large house" mortgage initially.

Also, my experience is of properties whose "performance" varies hugely, and having more properties in the "ladder" makes it more likely that you will stumble upon those high performers compared to staying put. The top two performing properties in my ladder returned 61% and 47% growth in value each over 3 years. The bottom performers were more like the 3% pa, above.

It is an interesting question, especially if you want to avoid moving a lot.

jules888

maureen100 wrote: »

Our mortgage should be finished in 18 months time and after that we plan to save for another 2 years to upgrade without needing another mortgage. We currently have a 3-bed detached and want to upgrade in the future to a 4-bed detached. We don't have children so a smallish upgrade like that will be enough for us permanently and we live in the north where prices aren't too bad.

We paid our mortgage off years ago.Now moving using house sale and savings so can be done.We are going from a 3 bed semi to 4 bed detatched.We are aged 45 me and 46 hubby.We dont want to move again for a very long time!
Good luck!

CathT

We bought our first house when I was 21 (was end of 2002 was prices started to climb and there were hardly any houses for sale!) Bought for 42k and sold for 84k two years later.

We are now in our 'forever' home(or so we thought) and outsanding mortgage is just over 100k. I am 30 and would love to be MF by 40. We do have 2 young children though so although on paper it's probably possible I'm not sure how realistic it is.

Magpie23

I'd love to be MF by the time I'm 40, just 6 years and 6 months to go! I've got £105,000 on a repayment but slid it back til 25 yrs to focus paying the c/c's off. Mission complete, now it's just the mortgage to go.

I have been playing around with the mortgage calculator and if I throw everything at it (£2k p/m) then it will be paid off in 5 years. But with 3xDDs, I'll have to see just how feasible it will be with my demanding (not so little) darlings.

So, Happy New Year, lots of Love & Luck to Us All!!!

Magpie
-x-

SuperSecretSquirrel

When we bought our house in 2010 I was 26. Without overpayments we'd be mortgage free in 2035 and I'd be 51. The aim is to get that down to mortgage free in 2020, when I'll be 36.

We're DINKY's, so right now we can afford to have an ambitious target and still have a good quality of life. We still have the holidays and the cars (and pensions), we just don't waste our money on stuff that's of less importance to us day in day out.

The house is a three bed detached, so there's room to grow - the chances of circumstances forcing us to move to a larger house are quite low. If we do hear the "pitter patter of tiny little drains on our resources" we might not manage to be mortgage free in 2020, but then again, we'd probably cut down on the holidays and cars to be honest and try to keep on OPing whatever would be manageable. If we had octuplets and had to move, the greater equity in the house would help somewhat I guess.

Of course redundancy could throw the whole plan out the window, but by minimising our debt at least we'd be in a better position than had we been overly frivolous with our cash during the good times.

The only other potential complication I can think of is that as we near mortgage free status, we might find ourselves taking out a new mortgage on an investment property. It won't be something we'll be rushing into though, if we BTL we'll go the whole hog with formal business plans and the like, it'll be a cold business decision backed up by a stack of figures!

PS - Lois_E, twentysomethings tend to have a good appreciation of the classics - everyone should know what a flux capacitor is, and that it requires 1.21 jiggawatts to operate!