On the way to net zero...

OnTheWay

So a long time lurker, reading some great advice and we are getting ourfinances in order and trying to get ourselves mortgage free (or at least to netzero in the short term), whilst trying to balance paying the mortgage down,living for today and saving for the future - We would welcome any insight,encouragement or a different approach to doing things!

So about us - we are 39 & 35 and both fortunate to be in well paid jobs,although my wife is currently on maternity leave. The plan is to hopefully (allbeing well) have another child around Autumn / Winter 2015, at which point mywife will take another 12 months maternity leave, followed by us both goingpart-time or us going down to one full-time income.

Our finances - we currently have two properties, one (my old flat) on anInterest Only BTL mortgage, which delivers a 5% yield and has about 100k ofequity in it - the intention is to pay off the outstanding capital on themortgage by way of the 25% pension lump sum at some point in the future.Broadly speaking we can ignore this property for the purposes of theresidential mortgage - although we could obviously realise the equity to paydown the residential mortgage, we'd rather not do this and don't mind beingleveraged in the property market as we've got a 15 year timeframe.

Our home is worth approximately 600k and we currently have a mortgage of327k outstanding on it - which is quite a scary figure. We have this on anoffset mortgage, where we have c. 50k in our offset accounts and my wife'sparents have generously offset another 70k against our mortgage - so we have aninterest bearing mortgage of just over 200k. Our mortgage rate is fixed at2.64% through until September 2018. Ourmodel assumes that same rate continuing beyond that, which may well not bevalid.

In addition to this we have c.54k in stocks and shares ISAs, 2013/4 &2014/5 full subscriptions plus a little bit of growth - we have consciouslychosen to put these in place as we are of the view that they will grow atgreater than 2.64% pa across the timeframe to September 2018, so will benefitus more than being sat in the offset account. In addition to this we made acapital injection to the BTL business from the offset account of 22k when weremortgaged the BTL flat recently - we are able to offset the mortgage intereston the 22k - so this brings the effectiveinterest bearing mortgage to c.130k.

The additional measure that we work from is Outstanding debt, which is themortgage debt less our offsets (not my wife's parents) and the ISAs - so thisis about 223k or so.

At the moment we make a monthly payment of £1,550 of which about £450 ismortgage interest, we are also trying to overpay to our offset account at therate of 1.2k per month whilst on maternity leave and 4.2k per month when we areboth working full time / early stages of maternity leave

Which means the following should hopefully just about come true (given someadditional capital injections we know about):

o NextMonth - Actual interesting bearing mortgage <200k – Capital injection weknow about

o December2014 - Outstanding debt <200k

o Feb2015 - Effective interest bearing mortgage <100k (Mort minus offsets, ISAsand 22k in flat)

o July2017 - Outstanding debt <100k

o November2017 - Effective interest bearing mortgage = 0

o December2020 Outstanding debt = 0



In addition to this we are putting a fair amount of moneyinto pensions as it’s something we’ve neglected over the years. House repairs and holidays will be paid forout of any bonuses that we receive. Soany thoughts on the arrangements? Shouldwe be prioritising things in a different order?



TLDR:

Mortgage = 327k

Offsets = 120k (70k not ours)

Interest Bearing Mortgage = 207k



ISAs = 54k

Interest offsetable on 22k

Effective Interest bearing mortgage = 130k



Outstanding debt (Mort minus our ISAs and Offsets) = 223k



Aiming to get to net zero November 2017 and debt zeroDecember 2020