Young mortgage-owner wanting advice from those experienced!

Competsoph

Hi everyone!

I am 26 (just turned🥳) and I will soon be completing on my purchase. I will have a 25 year mortgage at 133500. Now I have always been ambitious and hard working in every aspect of my life and I want to pay this mortgage off ASAP. Our house will need decorating and we will also need some furniture as this is our first house. I doubt in the first year I will have a huge amount of spare cash knocking around BUT I am really eager to begin chipping away at that number. At the moment my partners job is insecure and I am buying the property on my own anyway!

After reading on here for a while Ive come across some suggestions about saving first and then paying off in lump sums to ensure you always have some savings for back up etc. I’m just looking for some advice from people who’ve been there and done that or any nuggets of gold you think I should know before I start. I’m sure this can be done in a variety of ways so any experiences are beneficial!

Thanks all, stay safe xx

bethjames5681

Firstly - congratulations! How exciting and what a milestone. 
My advice (I'm not mortgage-free but chipping away).

• First year - you will, as you say, have a lot of outgoings plus you want to enjoy your new purchase. Don't put too much pressure on yourself but document your budget and get a handle on how things might play out.
• Once you have a sense of your monthly commitments, build up a buffer of 3-6 months outgoings
• Make sure you put some aside for holidays.
• Then, presuming that your mortgage rate is lower than all the savings rates available, start overpaying. Identify a regular sum per month, then add to it ad-hoc when you can.

AnotherJoe

DO not get suckered in by all the MFWannabees paying down loans that are at rates less than inflation;after youve dealt with essentials make sure your pension is catered for, as that will give you by far the best return on your money.  By far. By so far its a joke there's a forum here that encourages people to obsessively pay off mortgages insted of looking at the bigger picture..

Overpaying was a good idea 30 years ago, maybe 20. Now, its a poor one, especially if you focus on that instead of longer term subsidized investments via a pension.

At the very least, make sure you contribute enough to get the employers matching amount. Paying a mortgage down instead of getting all that is like setting fire to your money.

LadyGnome

As inflation is currently below 1% your comments are not entirely accurate. In fact there are plenty of people with mortgage rates that exceed the 2% inflation target. 

You are not wrong about pensions but obsessively focusing on pensions is no better than obsessively focusing on mortgages. 

If you read the board for a while you will find plenty of people taking a balanced approach. 

Socajam

As we are going into uncertain times post corona virus and as your partner's job is insecure, I would say save like a pauper for 12 months emergency fund and 12 months life happens fund.
Yes, it's a lot of money to save up, but we are going to be living through hell for the next couple of years and those who have savings are the ones who will make it through.
All the money that central  government have paid out will be clawed back through taxes etc.
The same goes for local authority: council taxes and other council services will increase to offset the decrease in money coming from central government.
I don't think that a lot of people thinking this far ahead, but if you can start to put your plan in motion, to give you a cushion when the the !!!!!! hits the fan.

sharpe106

What rate is your mortgage?

When you overpay on your mortgage remember that money has in effect gone you can’t get it back if you need it without re-mortgaging again. So as others have said make sure you have a good safety net for any unexpected items.

Accountant_Kerry

AnotherJoe said:

DO not get suckered in by all the MFWannabees paying down loans that are at rates less than inflation;after youve dealt with essentials make sure your pension is catered for, as that will give you by far the best return on your money.  By far. By so far its a joke there's a forum here that encourages people to obsessively pay off mortgages insted of looking at the bigger picture..

Overpaying was a good idea 30 years ago, maybe 20. Now, its a poor one, especially if you focus on that instead of longer term subsidized investments via a pension.

At the very least, make sure you contribute enough to get the employers matching amount. Paying a mortgage down instead of getting all that is like setting fire to your money.

WOW! perhaps people have different priorities to you? 

Lomcevak

AnotherJoe said:

DO not get suckered in by all the MFWannabees paying down loans that are at rates less than inflation;after youve dealt with essentials make sure your pension is catered for, as that will give you by far the best return on your money.  By far. By so far its a joke there's a forum here that encourages people to obsessively pay off mortgages insted of looking at the bigger picture..

I certainly agree with looking at overpayment as part of a bigger financial plan, and would always suggest making sure good pension provision is in place as a priority - for many of us, this implies significantly larger contributions than may be going in to default defined-contribution workplace pensions. My approach has been to max out both my pension and S&S ISA allowances before making mortgage overpayments.

Saying that, as someone mid-40s who is also now mortgage-free 12 years ahead of schedule, there is also an enormous benefit to not being constrained by mortgage outgoings, which isn't captured by just the balance of negative real returns vs the equity risk premium. I now have a number of options in life that I didn't have before: quite how that optionality is valued is personal, but it's not zero. So I don't think it's "suckered" or a "joke", if you place a high value on the options being mortgage-free gives then it's a rational thing to do. But, yes, prioritize, and do it as part of a plan - don't do it because other people are doing it.

Competsoph

Hi all, thanks for the advice so far.

Just to add some context I have a significant amount of personal savings behind me, in addition to my deposit. I certainly have more than 12 months emergency fund so that’s something I don’t need to worry amount. 

The house will need some decorating and furniture as mentioned etc so I will, for the first year, be prioritising getting our house in order. I’m just wanting to make sure I have a plan as I would like to pay off the mortgage sooner than the 25 year term. 

I work for the NHS and pay over 9% into my pension therefore this isn’t anything to worry about either. 

I consider myself in a very good financial position therefore anything I can do to put myself into a better one, is a win win. 

I appreciate the different views so thanks for all your contributions, I’m sure they’ll keep coming! 

Competsoph

sharpe106 said:

What rate is your mortgage?

When you overpay on your mortgage remember that money has in effect gone you can’t get it back if you need it without re-mortgaging again. So as others have said make sure you have a good safety net for any unexpected items.

My rate is 2.14% fixed for 3 years. 

I put forward a 10% deposit and chose 3 years as 2 isn’t long enough for me and I don’t intend on moving within this time frame. I didn’t choose 5 as I felt this was too long a commitment for me to make when beginning.

diggingdude

i don't think you should be put off by overpayment doubters.  I know the day I am mortgage free and don't have to do my current job will mean more to my quality of life than many things