Mortgage Free by 2026 - I hope!

Having been blissfully debt-free all my life, I'm about to take on a mortgage at the grand old age of 34 - and I want to be rid of if as soon as possible. So welcome to my challenge!

My long term goal is to pay off the mortgage entirely by January 6th, 2026. Ten years seems far longer than necessary, but I know that there will be unexpected hiccups down the road, so estimates need to be realistic. I do not want to set unrealistic targets and then use them to excuse my own failure.

A bit of background - I'm a software developer, my wife works in sales, and we live in London. We got married in July, and we're just about to complete on a house - both as first-time buyers. We have no children as yet, but we hope to change that in due course.

Our mortgage (as of January 5th) is £300,400, on a 5-year fixed at 2.19%. That is an enormous sum, both in absolute terms and relative to our incomes, which is why I want to get rid of it ASAP. We can make annual overpayments of 10%, so that leads me to my medium-term goals:
  • Make this year's maximum overpayment of £30,400.
  • Make maximum (roughly £26,062) overpayment for next year by February 1st 2017.

Once we have taken out the mortgage and paid moving expenses, we will have roughly £35k in cash (we are in a slightly better financial position than we thought when we applied for the mortgage). Of this, £16k will go into a rainy day fund (£6k with TSB at 5%, £5k with Nationwide at 5%, £5k with Lloyds at 4%). This is basically a year's worth of mortgage payments, in instant-access accounts, in case one of us loses our jobs, or we have a financial emergency. Even with tax, this money is still getting a better return than paying off the mortgage. If we ever have to draw down on these accounts, then topping them up will become first priority.

The remaining £19k will go straight into the mortgage. This means I have to save £37,100 over the next 13 months to meet my medium term goals. Challenging, but doable!
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  • Good luck in your journey. We also married this year, in April. I had paid my mortgage off once while on my own, but we start a new mortgage on our forever home (and first home together), next week. We too hope to be mortgage free again in January 2026, although we won't be having any babies to slow progress down (we're a bit older than you :) ) So a similar journey for us. Here's to the next 10 years :beer:
    :j
    I shall call him Squishy and he shall be mine and he shall be my Squishy.
  • So, how am I going to save £37,100 over the next 13 months?

    We have a combined (post-tax) income of roughly £5,800 per month, but this is irregular as a lot of Mrs Salemicus's income is commission. We have estimated, generously, our monthly, non-mortgage outgoings at £2,000. The mortgage is £1,300 a month, leaving £2,500 free. We intend to top this up by renting out our spare room at £600 a month - as it has an en-suite, this should be doable. Adding it up, this should give us the £37k we need over the year.

    To prevent the £2,500 burning a hole in our pockets, I will pay £1600 per month into regular saver accounts at 6% interest. I do not want to pay in more than this, as it may leave us with insufficient cashflow flexibility. These will mature in a year's time, and go towards next year's overpayment.

    I will also look towards additional sources of income, not accounted for above, specifically:
    * Hopefully a pay rise.
    * Annual bonus.
    * Taking payment in lieu of some holiday time.
    * Providing out-of-hours support for my employer (and getting paid for it).

    These additional sources of income should provide some flexibility in the above numbers.

    However, it is easier to reduce outgoings than increase incomings. All things considered, I find it very hard to believe that we need to spend £2,000 a month and believe there are big savings to be made there. However, I have not wanted to reduce that figure yet, because until we move into the new house I will not have as good a handle as I would like on what will be involved.

    My rough estimates are:
    Council tax: £195
    Salemicus expenses: £500
    Mrs Salemicus expenses: £600
    Groceries and sundries: £250
    Electricity: £50
    Gas: £50
    Water: £50
    TV+internet+phone: £50
    Maybe a cleaner: £60
    Unexpected expenses: £195

    This leads to my short term goals:
    1. Find a lodger for our spare room at £600+ per month by February 1st 2016.
    2. Drill down into that £2000 and find savings.
    3. Put additional money aside out of my own £500 allowance.
  • edited 7 February 2016 at 3:10PM
    SalemicusSalemicus Forumite
    343 Posts
    Sixth Anniversary 100 Posts Name Dropper Combo Breaker
    edited 7 February 2016 at 3:10PM
    So, 1 month later, and how am I getting on?

    We moved into the house on January 6th, and we've only just finished unpacking and getting settled. Unfortunately there were a number of "unexpected" problems with the house - the sellers had wrecked the plasterwork on two of the walls by ripping off their wall-mounted TVs, there is some damp in one room that the surveyor missed, the roof of the garden shed needs replacing, and some of the electrics are broken. Naturally, these weren't entirely unexpected, in the sense that we knew that some things would go wrong, but the amount of problems (in a modern house) are surprising, and all will cost money to fix. Fortunately my father-in-law has been helping with some DIY which will defray some of the cost.

    I have persuaded my wife to make do with inherited furniture, at least for now, and by taking unwanted stuff from friends and relatives we have managed to get away without buying too many things, despite moving from a 2-bed flat to a 4-bed house. We did have to buy two more beds (negotiating a £110 discount), a washing machine, and some DIY stuff for the bathrooms, but all well within budget.

    The big negative is that we've yet to fully unify our finances, which is a big part of getting our expenditures under control. Banks have been very slow, and while I've persuaded Mrs Salemicus to go through the hassle of opening the various current and savings accounts I've asked her to, some of the switches are still going through. So I haven't yet been able to drill down into that £2000 and find sustainable savings, although we haven't been spending too much so far - and have beat the gas/electricity bills.

    However, there are some big positives; I found a lodger, paying the full asking price of £625 a month (and thus staying in the Rent A Room scheme threshold for next year), so that short term goal is done. We managed to pay off £20k (rather than 19k) of the mortgage from existing funds, and we received £4.5k from an investment policy of my wife's maturing, so we are ahead of schedule on the savings. We have overpaid the mortgage by £22,530 so far, and need to save around £31,000 over the next year.

    On the mixed side, we have decided to get a car, which will improve our quality of life but cost money to run and insure. Let's say this will cost £200 a month (estimated - will need updating).

    So, new short term goals:
    1. Drill down into the planned £2000-a-month expenses and find savings of at least £200 a month to allow for the car.
    2. Put additional money aside out of my own £500 allowance.
  • Petal88Petal88 Forumite
    263 Posts
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    Wow what amazing goals and well done on already paying off 22k! I also can't believe I've got a higher mortgage on my 1 bed flat than you do on a 4 bed house :(

    Can't wait to see how you're planning on cutting down on expenses!
    Mortgage Apr '15: £316,384
    Mortgage Oct '17: £305,399
    Daily interest at start: £38.23
    Daily interest Sep '17: £12.09
  • Hi - well done for being so organised.


    Its particularly inspiring that you have managed to get such good interest rates on your savings, I have been so lazy with doing that.


    anyway, good luck with your goals and I look forward to your future posts
    Mortgage Start - August 2013 £145,000 ************ Balance at April 2017 - £59,000

    Target - Overpay by £2,500 each month ************** Mortgage free by December 2018!
  • jodles16jodles16 Forumite
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    Best of luck with your journey, you will do amazingly! Will pop in again soon!

    Jodles :D
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  • A long time since my last update. So, how have things been going?

    Overall, a mixed story. First, let's look at income.

    My wife's company got acquired, and she received a tiny but very welcome share of the purchase, which we've put towards her pension as unlike me she had essentially nothing saved, and since then she has made some additional contribution that make this less of a worry to me. The purchasing company also switched her from commission-based pay to a straight salary at her "on-target" earnings, because they were worried about the risk of having to pay her some whopping commission, but in reality she rarely made on-target so this was a healthy pay rise for her. And she then used the higher salary as leverage to find a new, hopefully much more enjoyable job, at about the same salary but with what should be a healthy and achievable bonus. She starts early next month! So overall great work by Mrs Salemicus in playing her part.

    For my part, I got promoted - at first without a pay rise! - but eventually cajoled a 30% salary increase out of my employer. I have also been taking almost every overtime shift going, and the company has been doing well so I have seen healthy bonuses the past two years. I felt quite guilty earning significantly less than my wife, so I now feel I am properly pulling my weight.

    We have also kept our lodger this entire time, which has been brilliant even though it has gotten us some funny looks. But I don't care. It's precisely the idea that we should impress our contemporaries rather than make sound financial judgements that gets us into trouble.

    Overall, the income side has been excellent, with one hiccup that I will come to later. Once Mrs Salemicus starts her new job, we'll have post-tax income of about £6,900 per month, plus £625 from the lodger tax-free. That is without any bonus or overtime, and is after me paying 15% of my salary into a pension. This is by no means a fortune when you live in London, but it's more than enough for us to live on comfortably, and pay off our debts. I could likely make more money if I switched employer, and I will probably start looking seriously at that at some point, but for now that is not a high priority.
  • What about expenditure? Well, we haven't been budgeting too tightly, and have been more relying on natural prudence to get by. This hasn't gone brilliantly - The budget ends up around £22-2300 per month, rather than sticking to the £2000 target. This is because I don't have the energy or heart to deny Mrs Salemicus the little things she wants, but I have successfully persuaded her that the huge amounts we used to spend on eat out were very wasteful. I have also been saving money out of my allowance, to partially make up for this.

    We have also had some large out-of-pocket expenses:
    - Redoing the delapidated en-suite.
    - Replacing the broken boiler (such an annoying amount of money)
    - Re-painting the house.
    - Redoing the garden

    Overall, that's £20k or so.

    However, the other big change is that just under a year ago, Mrs Salemicus had a baby! This has both pushed up our expenses, and halved our income. She is still on maternity leave until she starts at her new job, so the expenses have not been too terrible so far, but when she goes back we'll have to add a large childcare bill to the above.

    But even with less than perfect financial discipline, and a long and mostly unpaid maternity leave, the income situation has been sufficiently healthy that we have made great progress on my goals.
  • ButtiButti Forumite
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    Part of the Furniture 1,000 Posts
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    A question springs to mind.
    Given you have a lodger and now have a child, did you get a cleaner?
    Debt LBM (08/09) £11,641. DEBT FREE APRIL 2021.
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    48% off mortgage

    'one day I will be rich and famous…for now I'll just have to settle for being poor and incredibly sexy'. Vimrod Member of MIKE'S :cool: MOB
  • So what are the scores on the doors?

    Mortgage debt: £180k.
    ISA (stock market): £52k.
    Rainy day fund: £17k - in instant-access bank accounts, mostly Tesco at 3%.

    This is a pretty satisfying position, as it means we've improved our financial position by over £150k over the past three years, almost entirely through saving. And this doesn't even include my wife's suddenly happy pension situation. Apart from during the maternity year, we were religious about our regular savers, and made the maximum mortgage overpayment each time. However, the new mortgage year has just started and so far I only overpaid by £10k, as we were not saving as much due to maternity, so I want to find another £9k ASAP to make the remaining overpayment.

    Going forwards, monthly estimates are:
    Mortgage: £1300
    General expenses: £3500
    Income (without overtime or bonuses): £7500

    Those estimates suggest we can save £3200 per month, at which rate we will have paid off the mortgage in about 4.5 years. But obviously that is far too pessimistic - I want to do better. So this gives me the following key short-term goals:

    1. Find £9k by early March to make the remaining overpayments (this is realistic as I have a lot of overtime pay due).
    2. Get a good handle on our expenditures, and find useful savings without affecting our quality of life.
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