At 33 the end is in sight

[Deleted User]

Hi all,

So after years of saving & indecision I will be shortly remortgaging onto a 5 year term (2 yr fix) reducing my current remaining term of 31 years significantly & saving close to 6 figures in interest payments in the process.

The initial deal I took 9 years ago was a 40yr mortgage at the peak of the property market. After the slump I couldn't afford to remortgage as I was on a low salary & didn't have much left over for a decent deposit so focused on progressing in work, setting up a side-gig as a consultant and over that last 2 years I've managed to save a sizeable chunk of £60k which I will be using as a deposit for remortgage.

This will leave me with a mortgage balance of £33k.

The likelihood is I will actually be MF at the end of the 2 year term because I will be making the max. overpayment as well as saving so at the end of year 2 I will have enough to clear the balance based on my calculations.

The last couple of years I've just had my head down just working & saving and the prospect of being MF by the time I'm 35 is leaving my quite giddy! What do I do next?

My plans are to:

1. Implement a more aggressive savings strategy post MF
2. Pursue other career aspirations once free of the onerous debt burden

I'm very risk averse and have avoided taking the gamble to pursue other career options save for a couple of courses in preparation of being MF so being able to see the light at the end of the tunnel is a huge boost.

Once MF I plan to establish my new career (a mixture of freelance consultancy work and my passion, music). After a few years I may look for a slightly larger property (3 bed instead of 2) and then let my current property out where I'd expect at the current rate to easily ask for £600PCM. That will go into some form of savings in part, with a portion set aside for any maintenance etc that will come from having a tenant.

I'm undecided on the move at a later date just yet as I'm quite happy where I am but I'm warming to the idea of using my current home to generate income without the burden of a BTL mortgage & then selling up in, say, 20 years time (at which point prices would have hopefully improved as price is still below what I paid). I would then sell up and utilise the proceeds as a contribution to my retirement income & to settle up on any other outstanding mortgage should I go down that route.

Looking at my friends now - I do worry for the future. Many have mortgaged to the hilt given the current low rates with 2-5 year fixed deals and are living hand-to-mouth with both people in the couple working FT but also planning to start a family in the next 5 years.

One such friend was fortunate enough to buy a property 2 years ago & due to location saw a 20k jump in value which was immediately withdrawn & spent on cars/holidays. To each his own but I would worry if that were me as I can only see rates going one way. Aside from some small areas locally, prices are pretty stagnant and when rates inevitably begin to climb I think it's going to be a tough time for many people out there. I think with the crash shortly after buying my house it has made me incredibly risk-averse and more inclined to focus on saving up a large deposit for any future move.

Interested to hear what motivators led you all to the pursuit of a MF lifestyle? It seems obvious to me what the benefits are but evidently not everybody shares the same outlook!

I had one question as my house is leasehold. I've just had a quote of circa 7k to buy FH including a contribution to the FH's legals. I want to avoid a costly/lengthy process and am weighing up biting the bullet on this now. There's 91 years remaining and I am aware of the cost increasing significantly as you approach 80 years remaining. Given I plan to keep the house long term I am leaning towards buying the FH now but wanted to see if anyone else had any thoughts.

best wishes.

User1489

I would buy the freehold now. The opportunity may not come again - and if it does it may be more expensive. I purchased my freehold 6 months after purchase of my flat, and haven't looked back - but we were being domineered by an expensive, lazy bordering incompetent management agent.

[Deleted User]

rasputin_thorpedo wrote: »

I would buy the freehold now. The opportunity may not come again - and if it does it may be more expensive. I purchased my freehold 6 months after purchase of my flat, and haven't looked back - but we were being domineered by an expensive, lazy bordering incompetent management agent.

Thanks Rasputin - that's where my thoughts have been with it, too. We don't really have any dealings with the freeholder we just pay a £140 ground rent and given the plan to sell it in 20-25 years it could prove impossible with what would be 70-71 years remaining.

freshcotton

Hi, we're sort of in a similar position. I'm 32 and aiming to pay mortgage off by Aug 2018. It feels like the home run, but then so much can happen i suppose.

My main motivation is interest savings and of course freedom so I can reduce my work hours or do freelance work with flexibility. I also want the sense of achievement of paying it off as soon as possible.

Anyway, all the best with your journey

NorthernMonkey1

For only £7k, I'd buy the lease. It'll only get more expensive. After being bitten once in a flat, my current house had to be freehold.
If you have £60k in savings, then consider keeping them in a S&S isa as a permanent offset of the mortgage.

If you get made redundant tomorrow, you're in a much more comfortable place with £60k in the bank and a £90k mortgage, than you are with a £30k mortgage and no cash.

My mortgage is currently offset with savings, but sits at around £30k. I'm paying off my mortgage and saving at a roughly equal rate.

Also, make sure you're taking full advantage of pensions, especially if you're a higher rate taxpayer. I only loose £580 of pay every month for each £1000 I pay into my pension. If you wan't to retire at 55, you'll need a fair few £100k

[Deleted User]

NorthernMonkey1 wrote: »

For only £7k, I'd buy the lease. It'll only get more expensive. After being bitten once in a flat, my current house had to be freehold.
If you have £60k in savings, then consider keeping them in a S&S isa as a permanent offset of the mortgage.

If you get made redundant tomorrow, you're in a much more comfortable place with £60k in the bank and a £90k mortgage, than you are with a £30k mortgage and no cash.

My mortgage is currently offset with savings, but sits at around £30k. I'm paying off my mortgage and saving at a roughly equal rate.

Also, make sure you're taking full advantage of pensions, especially if you're a higher rate taxpayer. I only loose £580 of pay every month for each £1000 I pay into my pension. If you wan't to retire at 55, you'll need a fair few £100k

Thanks for the reply & additional guidance. I will look into what you recommended as haven't read much into that before. Much appreciated. Aside from the MF goal I am also saving 25% of my monthly take-home into a pension.

Since my original post I have submitted the paperwork to purchase the freehold and should have it done & dusted in the next 10 working days as I have asked for an expedited service that was offered.

I guess my motivation on the mortgage front is because we are currently on SVR and have 30 years remaining and I want to significantly reduce the term. Redundancy itself doesn't worry me too much. I run my own Ltd Company now and whilst the business is in a very healthy position I do not count the money in my income so if the worst happened I would have that to fall back on - it's like a bonus every year.

I just take a dividend every year and treat it as a means of saving. I'm fortunate enough to have a few strings to my bow and having experienced ad-hoc layoffs etc in my time have never struggled there - I work in ecommerce where skills are in short supply.

To add some broader context I have some health problems and at some point in the future have been told I may end up needing to quit work (although I am doing everything I can to ensure that doesn't happen) so I want to ensure that if it does happen that the existing house is paid off to make it easier for my partner who would then become the sole earner for the household. Without going into it I am gradually losing my mobility - walking is becoming more difficult as is fine motor control - things like tying shoelaces etc are becoming increasingly difficult as well as living with significant day-to-day pain that unfortunately will only increase in severity and all I can do is slow it down, really. This is also why I am looking at doing something I enjoy for what may be a limited career timeframe.

Forgetting everything else about another home/rental etc I guess taking a pessimistic view of how the future might pan out the worst case would be me having to finish work due to ill health and having outstanding mortgage owing and putting an onerous burden on my partner so looking to try and clear that whilst I'm still fit (ish!). At the same time I am also looking at granting lasting power of attorney to my partner & getting a will drawn up should the worst happen.

Thanks again for your helpful response!!

[Deleted User]

freshcotton wrote: »

Hi, we're sort of in a similar position. I'm 32 and aiming to pay mortgage off by Aug 2018. It feels like the home run, but then so much can happen i suppose.

My main motivation is interest savings and of course freedom so I can reduce my work hours or do freelance work with flexibility. I also want the sense of achievement of paying it off as soon as possible.

Anyway, all the best with your journey

Likewise - best of luck with it. Are you keeping a diary on here with your progress?