Mortgage Free by 2026 - I hope!

Salemicus

Butti - thanks for your interest! Yes we did get a cleaner - the "maybe a cleaner" item above turned into "definitely a cleaner!" and I wildly misbudgeted that item. Cost is probably double.

LeighofMar

What an amazing and inspiring ride. You guys are doing so great. Best wishes.

Salemicus

So, quick update:
Using overtime pay, and my wife's pay in lieu for the holiday she accrued while on maternity at her old job, I found the £9k to complete the mortgage overpayments for the year. Hooray!

However, I have not yet made much progress in terms of getting a handle on our outgoings. This is my next major "to-do." In particular, I want to have a proper annual budget with money set aside for various expenditures, to make it easier to see how we are doing on financial progress at any given time. This is critically important because Mrs. Salemicus is making noise about wanting to go on two (likely expensive) foreign holidays this year, and I want to make sure we keep this under control.

Salemicus

Really lost track of this, wow! An interesting time to reflect, as we are coming up on January 2021, the 5th anniversary of taking out this mortgage and starting this journey. Latest situation:

• I haven't (yet?) switched employer. My salary has kept going up in a reasonable way, but hasn't seen the step-change I'd like. I need to address this.
• But the reason I stayed was because I was hoping my share options would pay off, and this did happen. I got around two years' salary (pre-tax).
• We've been frugal with our budgeting, but we've had another baby. This has both increased our expenses again, and reduced income (wife is on maternity leave until January).
• Miraculously our lodger is still with us. I wouldn't have put up with the noise of a newborn and a toddler myself!
• I'm paying 30% of my pre-tax salary as pension contributions. Once Mrs Salemicus goes back to work, we'll have ~£7200 per month income post-tax. I would hope to be able to save around £2000 per month at that rate, although we would have to see exactly how childcare would stack up.
• I am expecting a pay-rise of 10-15% in the next few months, and approximately a further £10k p.a. in bonus and overtime, but I deliberately don't want to budget for that - don't count your chickens, then it can be a positive surprise to the budget, as it's easy to find surprises in the other direction.
• We originally took out a 5-year fixed, and that's now coming to an end. As we've made maximum overpayments every year, we've paid off over half of it, and with the share options payout, we'll re-mortgage for £60k and a 5-year term, while keeping a healthy pot in reserve. We're going for a 2-year tracker at 1.74%, which is far from the cheapest rate possible, but comes with no fees and no early repayment charges, as I would hope to pay it off entirely during that initial 2-year period.

Conclusion: Currently well on track to exceed the original target!

Salemicus

5-year retrospective, lessons I've learned:

• Budgeting is crucial. It's too easy to fritter away money when we're not focused on where it's going. At times I've done a really good job of this, but when I'm stressed this goes by the wayside. Mrs Salemicus doesn't have the discipline for this, this is something that has to come from me.
• Some of our choices have exposed us to gentle ridicule (having a lodger, not going on a major holiday last year, etc). I don't care a whit, but I think this is a little harder on my wife.
• The obvious steps of bearing down on expenditures are crucial, but there are much bigger gains to be had by increasing income. I don't think I've done as good a job here as I should have. In the next period, I need to make sure this is my biggest focus.
• Children are super-expensive. Yeah, we all knew that one, but still.

Salemicus

All seems good then? No! Unfortunately, the original mortgage-free target has to change, because:

• We want to move from our part of London to Buckinghamshire, for schools and general lifestyle. The part we want to move to is more expensive than the part of London we currently live in.
• We are now aiming for our "forever home." Obviously, nothing is truly forever, but we are hoping to be there for 20 years. This means a somewhat larger house.
• This means my key next goal is to do a good job of handling this move. This will (sadly) involve taking out a larger mortgage, then find a way to pay it off.

What's the budget? So, currently available funds:
~£700k from selling existing property? (Clearly the biggest variable and hardest to control. This is intended to be an overly-conservative estimate).
£30k further available savings
£60k mortgage
£7.5k estate agents fee
£3k solicitor's fees (both ends)
~£1k mortgage fees total
~£3k misc fees?
Total: ~£655k
HSBC have said they'd be willing to lend us £620k, but that seems insane to me - we'd clearly be overstretched. I'd like to borrow something around the ~£325k mark, which gives a budget of ~£950k after stamp duty, but if need be we could think about stretching to £425k, which would give an absolute top-whack budget of £1.03m.
Sadly, this wouldn't give us quite what we want in our desired area, but who gets everything they want? Compromise is always necessary, and I'm confident we can do nicely, even if we have to be patient.

Salemicus

So, where are we now, on a monthly basis? All income figures are net.
My salary: 3159 (hopefully increasing to ~3500 as of November, but let's not budget this)
Wife's salary: 0 (due to maternity leave, increasing to 3634 as of January)
Lodger rent: 625
Electricity/Gas: -72
Water: -43
Life insurance: -27
Child ISA for eldest: -25 (need to set this up for youngest too so call this -50)
My phone: -13
Mortgage: -1301
Council tax: -236
Cleaner: -204
Gardener: -50
My allowance: -500 (dropping this to -100 as it's not necessary, I'm just returning almost all this money to our savings)
Wife's allowance: -600 (would like to reduce this)
TV/broadband/phone: -58 (will be -25 as of next month, so let's say -25)
Wife's weird investment thingy: -25
TV license: -13
Car insurance: -51
DVLA: -14
Childcare: -854 (but really it's -688 because of the government top-up, but it will be increasing to -2741 as of January, with a "real" January figure of -2407 after the top-up)
Joint credit card: -724 (rough average - what dirt is swept under that carpet?)
Total: -£451 (+£1462 once wife goes back to work)
Pretty obviously, our spending needs to be reined in if we are to have any hope of meeting even my conservative saving target of £2k per month.

Tartan_Mum

Hi I’ve just found your diary. You’re doing so well with some healthy numbers. 

You have three allowances in the SOA above although I don’t think it’s included in the actual sum so you’re ok. 

Keep going. Great work! 

Salemicus

Thanks for the correction, @Tartan_Mum! Have amended. Honestly I'd give myself a B-.
High-impact goals:

• Sort out the sale of the house. This is not going at all well, and I am not sure why.
• Fight hard for an appropriate pay rise.
• Get Mrs Salemicus fully on board.

Lower-impact goals:

• Investigate alternative possibilities for childcare (e.g. nanny two days a week)
• Dig into joint credit card spend
• Set up Child ISA for youngest

First two are theoretically high-impact, but would have to be redone if we move, so can't get too excited about them right now. In service of trying to get Mrs Salemicus on board with the plan (which overall will have a much bigger impact than any individual action), I've asked her to look into them.

Salemicus

So, positives and negatives. The good news is I got a pay rise at the top end of my hopes, almost 15%. The bad news is that the house sale has gone very badly so far. I've got good help from this board, but we have not seen enough interest despite dropping the asking price, improving the listing and switching estate agents. We have now dropped the asking price once again, but the renewed lockdown has made the market very slow around here, and so I think we won't be moving till the second quarter of 2021 at the earliest. This will also affect our budget for a new house.

I feel very much like I am treading water and it is frustrating - I want to move on but cannot. I need to get out of this "on-hold" mentality and take positive actions in the ways that I can.