Aiming for Mortgage Free!

LeighofMar

Welcome with your new diary. Your MF journey sounds fantastic. Once lockdown ends, we can't wait to go traveling again in our travel trailer. The goal is to take an epic month-long trip across the US. Once the mortgage is paid, we could go even longer. That is the ultimate dream, isn't it? The freedom to do the things we want because we won't have mortgages over our heads. It sounds like you'll be able to crush your mortgage too. Best wishes.

rugbymadfamily

LeighofMar said:

Welcome with your new diary. Your MF journey sounds fantastic. Once lockdown ends, we can't wait to go traveling again in our travel trailer. The goal is to take an epic month-long trip across the US. Once the mortgage is paid, we could go even longer. That is the ultimate dream, isn't it? The freedom to do the things we want because we won't have mortgages over our heads. It sounds like you'll be able to crush your mortgage too. Best wishes.

Love that you already have a travel trailer! We just have a tent at the moment but have rented a camper in Australia and loved it - hence the retirement plans! 

Looks like you are making some great progress on yours :-) It's so good reading these diaries, most of my friends either don't have mortgages or have no interest in paying them down early so its nice to talk to people who have similar financial goals!

getmore4less

I drop in on MFW every now and then to throw in my  2p
Looking at the mortgage and its 25years. from July 2018 now 22y 9/10m
what was the fixed term for?
the idea is to plan so you renewal coincides with a better LTV a first fix of 2/3 years is often best when starting out at 90% as you get under 85% quite quickly
Using your value of £390k look at the LTV over the first 5 years before overpayments 
Y0 £352k 90%
Y1 £342k 88%
Y2 £331k 85%
Y3 £320k 82%
Y4 £309k 79%
Y5 £297k 76%
at £328,391 you are under  85%  so can start considering what the rate should be next change
Should be able to get under 2% if things stay as they are.
which lender? 
That will give you targets for retention deals

With the mortgage at 2.4% and the car loan at 3.5% hit the car loan first that is costing more then the mortgage.

The SOA will sort itself out over time with diligent tracking, once you know where the money is going you tend to adjust.

I recommend doing a full years plan ahead rather than a month at a time.

Decide in advance how much you want to spend on each category

You have nearly £70k to prioritise and get the balance right.

Eg. you have £12k for entertainment and fun but only £2.4k for holiday is that the balance you want.

Then you probably have overlaps if you eat out a lot  then the food bill should be smaller.

one option is to consolidate the house food,takeaways and eating out into one group with subcategories for each.

Then you can divide the total and make choices  eat out on Friday £100 or spend £50 on one of those great meals we were making during lock down. 

In any budget I think alcohol should have its own subsection, you have wine club but how much of the groceries and the entertainment ends up on booze?

The problem when you have plenty of money coming in and loads left over every month it is easy to just be wasting money because you can.

Financial success is more about what you spend your money on, than how much you have coming in.
you make the choices but make them informed by understanding where every penny goes and be sure you are getting good value for you spending.

If you think like a dealing with debt person that is currently £340k in debt and short of a retirement fund

If you want to retire early you need that goal in the plan now so work out how much you need to be saving.

With a take home of  £3979 OH will have income in excess of £65k definitely worth looking at maxing out the pension with the 40% tax money

 

South_coast

getmore4less said:

Financial success is more about what you spend your money on, than how much you have coming in.

Love this! It's so true as well. There's a thread going on over on DFW at the moment someone who's bringing home £7k a month, but overspending to the tune of £2.5k/month 😮 It really is what you do with it that counts!

QueenJess

South_coast said:

getmore4less said:

Financial success is more about what you spend your money on, than how much you have coming in.

Love this! It's so true as well. There's a thread going on over on DFW at the moment someone who's bringing home £7k a month, but overspending to the tune of £2.5k/month 😮 It really is what you do with it that counts!

Ironically I was just reading that exact thread!  It's all about priorities really.  Spend money on the things that are important to you and don't spend on the things that aren't.

rugbymadfamily

getmore4less said:

I drop in on MFW every now and then to throw in my  2p
Looking at the mortgage and its 25years. from July 2018 now 22y 9/10m
what was the fixed term for?
the idea is to plan so you renewal coincides with a better LTV a first fix of 2/3 years is often best when starting out at 90% as you get under 85% quite quickly
Using your value of £390k look at the LTV over the first 5 years before overpayments 
Y0 £352k 90%
Y1 £342k 88%
Y2 £331k 85%
Y3 £320k 82%
Y4 £309k 79%
Y5 £297k 76%
at £328,391 you are under  85%  so can start considering what the rate should be next change
Should be able to get under 2% if things stay as they are.
which lender? 
That will give you targets for retention deals
With the mortgage at 2.4% and the car loan at 3.5% hit the car loan first that is costing more then the mortgage.
The SOA will sort itself out over time with diligent tracking, once you know where the money is going you tend to adjust.
I recommend doing a full years plan ahead rather than a month at a time.
Decide in advance how much you want to spend on each category
You have nearly £70k to prioritise and get the balance right.
Eg. you have £12k for entertainment and fun but only £2.4k for holiday is that the balance you want.
Then you probably have overlaps if you eat out a lot  then the food bill should be smaller.
one option is to consolidate the house food,takeaways and eating out into one group with subcategories for each.
Then you can divide the total and make choices  eat out on Friday £100 or spend £50 on one of those great meals we were making during lock down. 
In any budget I think alcohol should have its own subsection, you have wine club but how much of the groceries and the entertainment ends up on booze?
The problem when you have plenty of money coming in and loads left over every month it is easy to just be wasting money because you can.
Financial success is more about what you spend your money on, than how much you have coming in.
you make the choices but make them informed by understanding where every penny goes and be sure you are getting good value for you spending.
If you think like a dealing with debt person that is currently £340k in debt and short of a retirement fund
If you want to retire early you need that goal in the plan now so work out how much you need to be saving.
With a take home of  £3979 OH will have income in excess of £65k definitely worth looking at maxing out the pension with the 40% tax money

Fixed term is 5 years (at the time I was worried rates would go up with Brexit so was more concerned about getting fixed for slightly longer and taking a slightly higher interest rate, than fixing for 2 years and interest rates then being higher - wrong in hindsight lol) with Barclays. Its quite a chunky early repayment clause (think 5%) so not worth getting out of early to re-mortgage at this point. 

Re the car loan, I had thought about OP on car. But, although the interest rate is slightly higher, because the loan is so much smaller (£13.5k vs £351k) I actually save more in interest by OP on the mortgage than the car (for the OPs I have planned for the remainder of the 5 year term, putting those into the car would save me about £700 in interest, but putting them into the mortgage saves over £7k using the OP calculator on MSE).

You are right, definitely need to track a bit better...I call it entertainment but its basically spends in the week and could be a drink at the pub or could be buying some house stuff in Ikea, but without tracking properly - I just dont know where its gone. That's the aim from the next payday - track every penny and categorise! Will get updating my spreadsheet, it goes out for 12 months but currently just categorise as monthly recurring spend (mortgage / bills / food / insurance) and then the weekly spend for entertainment / other costs instead of actual cost type categories.

Comment re lots coming in and "wasting" because you can definitely makes sense. I've been good over the years in terms of continuing to live off of my previous salary despite several payrises (and putting the rest into savings which paid for the house deposit / stamp duty (thats a killer - was nearly £10k for nothing!!!) and then our wedding as well). But, can always do better on the cutting down expenditure (provided I work out where it is all going!).I upped my pension contribution at start of tax year to 6% and the Company put in 8% so total 14% which is ok (I think recommended is 15%?), but will try up that again at start of next tax year (can only make changes once a year at my place).

"Financial success is more about what you spend your money on, than how much you have coming in." Love this way of thinking...too much time in London offices makes you think its all about what you earn, (I'm definitely guilty of thinking, just the next payrise and I will feel secure financially...but that doesn't happen!) but actually, that's not true. Also saw that thread on income of £7k but overspending by £2.5k per month, couldn't believe it. It's income of about 20% more than we earn combined, but the lifestyle couldn't be further from what we are trying to achieve and I have no idea how he does it on that sort of money. Although I guess that's where the overspend of £2.5k comes from. Slippery slope downwards from there on.

getmore4less

Re the car loan, I had thought about OP on car. But, although the interest rate is slightly higher, because the loan is so much smaller (£13.5k vs £351k) I actually save more in interest by OP on the mortgage than the car (for the OPs I have planned for the remainder of the 5 year term, putting those into the car would save me about £700 in interest, but putting them into the mortgage saves over £7k using the OP calculator on MSE).

, you save more money by overpaying the higher rate.
You must have use the calculators wrong.
You only count the period of overpayments
Did you remember to add all the car payment that you would not make by paying it off early to the overpayment pot once the car loan is paid off?

Size of loan at term make no difference to the saving only the rate does.

eg (put your own number in)Car loan
£13,500 3.5% 5 years is £245.54pm interest  £1,235
overpay £300pm and it is paid off in 2y 2m interest £535 saving  £700

No overpayments on the mortgage for the first 2y2m but you now have  £545.54 to overpay for the next 2y10 months

getmore4less

woops got the income the wrong way round, get that tax relief while you can 

I think it is a good idea to do a budget that is a forward plan on how you want to allocate the money by thinking about what the priorities are.

I would normally recommend a 12 month retrospective SOA based on the last 12 month, work out where it all went but that may only help a little bit as a lot has gone on this year that mess up the spend profiles and a weeding.
Sometimes it helps to have a few goals and work back from them, once the tracking starts to kick in you can start to think about how much each of those little spends should be for the year eg thinking in advance what you want for the house rather than loads of little impulse buys.

the other thing to do is thinkabout the stuff you don't use and especialy any food you end up throwing out, they are all things you did not need to buy.

will have a look at the £7k thread, there were quite a few big earner drowning in debt threads on the old uk motley fool site which has gone, now lemonfool still has a debt board and worth a read for that and investing. 

I don't think you have any howlers in your SOA just needs an overhaul to spot the waste and extract better value once you know where it is going..

if you can make time and have a freezer shopping at reduction time can save a fortune, we do most of ours at Waitrose and M&S as they offer the best discounts and quality, we bulk buy when cheap the expensive items or upgrade to better cuts of meat.

getmore4less

ON the mortgage front with the 5 years fix still a bit of time to go baring a crash looking like 75% LTV your next option Barclays the next step is 60% .
the 75% is cuurently 1.58% with £999 fee something to look forward to.

Hazelnutty

Hey there just wanted to stop by and say hi! I agree with peeps suggesting tracking spend. If you kept a spending diary of every penny for say a month then at the end you could review it and decide how it makes sense for your household to divvy them up into categories for budgeting purposes. I have an Ents budget (basically any eating out, drinks, tickets, trips for the family as we're a single income household) but I do have a small personal account with debit card into which I put about £25/month for occasional frovolities such as the odd lottery ticket. Because of my job I don't have many opportunities for additional spending but when I do I always put a few quid into this account. Holiday spends is a separate pot (I have about 12 pots, which is probably excessive!!!)