Amy's mortgage free goal!

amy333_2

Hi

I am joining this thread as I really hope to be mortgage free and would love to receive any advice and support from others aiming for the same goal.

I am 33, married with 2 children. We own a house worth approx £300,000 with a current mortgage of £160,000 (give or take a couple of hundred interest, I need to check exact figure). We are about to make a big change and move area to new jobs which come with free accommodation(no bills) and from next month will be renting our house out so should have the capacity to make good inroads on our mortgage over the next few years.

Monthly income:
Rent (after agent fee deduction): £832.50
Husband net salary 1 = £1700
Husband net salary 2 = £150 approx (tbc)
My net salary = £2300
Child benefit £137

TOTAL INCOME = £5119.50


Monthly outgoings:
1. Mortgage £750
2. Mobile phone = £12.60
3. Mobile phone = £19.89
4. Food shopping = £200
5. Petrol = £200
6. Nursery fees = £500
7. School fees = £375

TOTAL OUTGOINGS = £2057.49

Total remaining income monthly = £3062.01

The school fees are low because we receive a generous discount but will fluctuate slightly over the years depending on the year our eldest is in, the nursery fees will actually reduce when our youngest starts school. I am unsure what amount is realistic to overpay on the mortgage per month, being mindful that the above draft budget does not yet include things like clothes, leisure, holidays etc. I had thought of around £2000 but not sure if this is too ambitious. It would mean we would repay the mortgage in around 5 years, rather than the 22 year term we have. I struggle to set aside a budget for these things and would appreciate any advice as to a realistic amount for these and for the mortgage overpayment. The food bill is an estimate - one of the benefits of the jobs are all meals for the family but we will still have household costs like cleaning products/nappies/milk/bread and basics to have in our own house and some food.

We have decent equity in the house but only about £3000 savings at presents. We owe a family member £8000 which will be repaid first over the next 3 months, so this plan will start from the start of our new jobs in September. We have no other debts or overdrafts.

We also need to factor in tax on the rental income which I am not sure how to calculate exactly yet as I know that the interest part is not taxable and there are other things like some maintenance that can be offset.

We very much hope that the new jobs will be very successful and we will wish to stay for many years but appreciate it is impossible to predict many years ahead so are keen to maximise the renting of our house from the outset. The downside of course is that we don't have it to return to whilst it is rented but it seemed the sensible financial decision to make with the main goal of paying off the mortgage.

Hope to hear from some of you soon!

abi_a_mfw_mum

Hi Amy,

Welcome to the forum, I'm also a relative newby but everyone's very friendly.

I think you're right that you can't know how much you can afford to overpay until you work out your real outgoings. This should include your annual one off costs so you don't get thrown off course by them. The budget planner on the MSE site is quite a good place to start as it prompts you to consider how much each of these cost and helps you not to forget something.
Personally I find it helpful to track my spending, as it helps me know how much we actually spend on food etc. I use ynab but I'm sure others will have links to free spreadsheets/software you can use as well.

Good luck, it sounds like you've got a great opportunity and I hope the new jobs go well.

try_harder

Welcome amy333, i have only started on my mfw quest a few weeks ago so i am newish too but i have had loads of help and support . You are in a great position so good luck and welcome.

LadyGnome

Hi Amy
Best of luck with the new jobs and the MF quest.
As Abi says you need to work out your outgoings in a bit more detail once you have moved.

The position about mortgage interest being deductible for rentals is due to change next year and is quite complicated so you will need to look into that. The current 10% wear and tear allowance is due to be replaced by an actual costs system.

You don't mention pensions or an emergency fund do you have all of this in place?

amy333_2

Hi

Thanks for the replies so far. I think you're all right - I will do a proper spreadsheet and try to get an accurate prediction of costs. It might take a few months to get a really accurate picture because of the letting changes to the costs system you mention, knowing how much food etc we need to buy and as new landlords how many maintenance costs we generally get (hopefully very few for a while as the house is immaculate and we have had every minor thing fixed for the first tenants). We will probably cut down to one car but I do need to factor in that and landlord insurance and other bits and bobs.

We both pay into a pension and always have done. I currently only have abut £3000 savings though we should have about £6000 by end of August, even after paying back the £8000 we owe to a family member. I know it's not much - probably not 3 months - so we probably ought to build it up to £10,000 or so just in case.

LadyGnome

Sounds like you are getting a plan into place. Glad to see a reference to a spreadsheet, you'll find lots of us like nothing better than tinkering with spreadsheets, working out permutations - it can be addictive.
As you have pensions under control building up the emergency fund is a good idea.
I would also build up a bit of a surplus in the rental account to allow for voids even if its just a week between tenants whilst you give the place a wash and brush up. Landlord insurance can cover you for lost rent but you might not want to claim for a short period. From memory Landlord insurance is tax deductible (I'd have to double check my tax return but I'm pretty certain it is an allowable expense)

choccielover

Be careful with the rental tax part, the law is changing over the next few years and I seem to think less of the mortgage interest is allowable as a deduction.