65k in 65m

in Mortgage-Free Wannabe
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TwentySixTwentySix Forumite
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Hi!

So, I've been reading this forum for a while now but I've only just decided to make my own diary. I have an obsession, which probably teeters on the edge of being unhealthy, with becoming mortgage free, ever since I realised I would have to borrow to own my own home. As I don't really have anyone that I can talk to about MFW in real life hopefully I can get the thoughts of like-minded people here! I've made a decision for my own peace of mind to stop scribbling and spreadsheeting away and to relegate all my mortgage related thoughts here.

Some background: I am 27, live up north and work in the public sector on ~£21k pa / ~£1500 pm. I bought my house in April 2021 on my own as a FTB and borrowed a total of £65k; for the mortgage and a loan needed to renovate the house combined. For simplicity's sake, I am totalling them together and considering them both as just one debt that needs to be repaid.

The mortgage is over a 25 year term, currently in a 5 year fix at ~2.5% and started at 80% LTV. I plan to overpay by using up the full 10% opening annual overpayment allowance for all six calendar years of the fixed rate by spreading it monthly over the years, and I am pretty pleased to say that for the 13 months in which I've had the mortgage I have achieved this! Unfortunately, even with very optimistic calculations and projections, I don't believe that I will have enough saved to clear the outstanding balance once my fix ends. I reckon I will need an additional few months, but no more than will take me over 65 months in total, to hit zero. Hence the title!

The loan, which is currently the bane of my existence, has a relatively high interest rate with a 5 year repayment period. In the 9 months in which I had the loan in 2021 I made quite large monthly overpayments, as it made a huge reduction to the interest charged. For 2022 I have reduced the overpayments in order to slowly rebuild my emergency fund. It's still enough to cover the monthly interest, which means my standard payment goes straight off the balance, even though it seems to not make the slightest difference whatsoever! Honestly, the money was spent so quickly and it is taking an absolute age to pay it back! In 2023 I plan to increase my overpayments significantly so that it can be fully cleared by the end of the year. That will make it 33 months / 2.75 years to clear the loan, instead of 60 months / 5 years.

So, in short, my MFW plan is to: overpay 1/12th of 10% of the annual opening balance each month for the mortgage, overpay on the loan to clear it by the end of next year, then build up savings to pay off as much as possible on the mortgage once the fix ends, and then be completely debt free by August 2026.

I will try and update this diary once a month for 53 (!) months. Please feel free to pop in and comment!
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  • TwentySixTwentySix Forumite
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    Month 13:

    An unlucky number for some, but to me this means that I've been a homeowner for a whole year now! Time has gone by so quickly, even though sometimes the days themselves seemed to drag. I remember when I got the keys and walked into the house for the first time as an owner; goodness, it really was not a good time at all. And it got a heck of a lot of worse before it got better. Lots of anxiety, stress and worry, and lots of tears were shed. For six months I had to pay full bills on both the flat I was renting and the house! Even when I was finally able to move in after renovations in September I knew I wasn't completely out of the woods yet. As I had wanted to use up my 10% overpayment allowance in the 9 available months of the year it meant my outgoings were still more than my income. In December 2021 I had less than £1k in my bank in the face of tens of thousands of pounds of debt! The only thing that got me through was the thought that "it will never be as bad as it is now". And how true that is. At the start of this year my overpayment allowance reset, reducing to 10% of the 1st January balance. It's a significant reduction when combined with the fact that I have a whole year to use it by, rather than the 9 months I had last year. This means my monthly outgoings are no longer greater that my income and I am slowly rebuilding my emergency fund, and every month I can feel that the debt noose gets that little bit looser.

    Update for this month: I've made my overpayments on both the mortgage and the loan. The balance on the loan is reducing so slowly, it's almost depressing. I haven't even paid back 1/3 of the total amount borrowed yet, but my calculations show that with this month's payment I'm at the halfway point for the total interest that will be charged over the course of the loan! Compound interest is no joke.

    The difference between my income and outgoings is going to reduce next month, which means rebuilding my emergency fund is going to slow down. With it being a year since I bought the house, the fixed rate energy tariff I was on has now ended. I'm on the variable tariff now and the rates are near enough double! I've increased my direct debit slightly, with a view to doubling it in July, as the NI threshold increase and a long overdue pay rise will give me in the region of an extra ~£100 a month. It would have been nice to have kept all of that for myself, but needs must. Mustn't grumble, I'm aware that I'm in a fortunate position to be able to afford it.

    I think I'll stop here, I've written a fair bit today!

    Bottom line:

    £53215 owed 

    £11785 / £65000 cleared 

    Daily interest: £4.66 

    Original MF Date: March 2046 

    Current MF Date: January 2042 

    Emergency fund: £1625 / £3000

  • smetfsmetf Forumite
    185 Posts
    Part of the Furniture 100 Posts Name Dropper Photogenic
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    Hi and welcome aboard!
    Sounds like you have a good plan. I suspect getting that loan cleared by the end of 2023 will make it easier to save.

    Lots of luck
    S
    Emergency fund 10k/10k
    House improvements fund 2k
    Holiday fund 1.6k

    Mortgage £88813.75
    MFW 2022 #35 2789.82/4000
    MFiT-T6 #10 aiming for 60k

    https://forums.moneysavingexpert.com/discussion/6283332/halving-our-income-and-still-aiming-for-mortgage-free#latest

  • powerspowerspowerspowers Forumite
    762 Posts
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    Happy new diary day!
    The 65 months will fly by, you’ve got a solid plan so keep on going 🙂
    MFW 2021 #76 £5,145
    MFW 2022 #27 £4,160 / £7,200 target 


  • LadyGnomeLadyGnome Forumite
    795 Posts
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    You are doing an amazing job.  Tackling the mortgage and loan from the outset will make such a difference in a couple of years.  It does feel like nothing is happening in the first year but what you need to consider is where would you be now if you had done nothing.
    Mortgage
    Start Nov 2012 £310,000
    Jun 2022 £152,029.12
    Reduction £157,970.88

    End Sept 2034 (but I have a cunning plan...)
    2022 MFW #78 £6200/£12000
    MFiT-6 #28 £1870.38 /£75000
  • TwentySixTwentySix Forumite
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    smetf - thank you for the welcome and the compliment!

    powerspowers - thank you! Haha, I hope that that's the case. I don't want to wish my life away but I do really want this debt gone!

    LadyGnome - thank you! It definitely does feel like now-me is suffering so future-me has it a lot easier!

    Thanks for your comments - I feel like my diary is and will be really boring and mundane but it's quite cathartic and that's why I'm going to continue. Apologies to everyone who reads it and has to suffer through my ramblings!
  • TwentySixTwentySix Forumite
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    Month 14:

    So, my second update here and as luck would have it, it's on Friday the 13th. Following on from last month's update, I'm glad I'm not a superstitious person!

    This month has been a strong one for my finances. As ever, I paid my bills, made my overpayments on both the mortgage and the loan, gave myself spending money, and as such I expected a small increase to my emergency fund. But would you believe it, right after I'd posted here in April, I checked my account and saw that the balance had increased by £150. Yes, the council had kept to their word and actually delivered the energy rebate on time! I had read lots of stuff online where it seemed that because councils had until September to make the payment that it'd be around then that they would actually pay it. So to have it paid now is a very welcome surprise!

    Along with that, I received the pay for a weekend of overtime than I did at the back end of March after the payroll run. Overtime isn't available at work often, but when it is offered, it's offered all at once. It's a fine line between ensuring a good work life balance and trying to make full use of the offer at the same time. I find that the sweet spot is to do just enough for £100 net for the weekend, and no more. This works out to be just under 1.5 days which means I still have some time to run errands and unwind. I always try to work the overtime even if it means I've pretty much worked all seven days of the week. As silly as it may seem, if I feel like I'm getting burnt out then I will take leave during the week for a break. Right now, I'm anticipating that I'm going to need a few days off as the current overtime is on for the next seven weekends. I'm definitely not going to turn my nose up at an extra £700! Even though I won't get to spend a penny of it as it's going straight into my savings! All it means is that I will have a full emergency fund much sooner than previously calculated which will do wonders for my peace of mind.

    Bottom line:

    £52460 owed

    £12540 / £65000 cleared

    Daily interest: £4.58

    Current MF date: November 2041

    Emergency Fund: £2085 / £3000

  • smetfsmetf Forumite
    185 Posts
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    That all sounds very positive and hitting the emergency fund sooner than you anticipated will be good.
    Glad you've had a good month.
    S
    Emergency fund 10k/10k
    House improvements fund 2k
    Holiday fund 1.6k

    Mortgage £88813.75
    MFW 2022 #35 2789.82/4000
    MFiT-T6 #10 aiming for 60k

    https://forums.moneysavingexpert.com/discussion/6283332/halving-our-income-and-still-aiming-for-mortgage-free#latest

  • savingholmessavingholmes Forumite
    20K Posts
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    Sounds like you are doing really well.
    Target 1) Debt free April 22 Target 2) Lose weight & get fit (started) 3) Write regularly 41426/70000 words Book 2 4) Develop passive income streams 5) Get to £3K EF (at £2.2K June 22) 6) Declutter 7) MFW starting at £201999 Nov 21 with 264 257 payments to go. Now £196,869. 8) Mortgage neutral progress (via private pension starting value c£3643 Nov 21) extra payments £312 including tax relief
  • TwentySixTwentySix Forumite
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    smetf - thank you! I'm going to try and ride this positivity train for as long as I can! 

    savingholmes - thank you! If only you knew the truth lol, I only mention the good stuff here!
  • TwentySixTwentySix Forumite
    6 Posts
    First Post
    Forumite

    Month 14:

    Time for my third update and let's start with a positive. My overpayment on the loan this month has taken it to below 1/3 of the original balance! For the first time ever I feel like I'm getting somewhere with paying back this loan. Whilst I can appreciate that the overall interest and term has been reduced massively by all the previous overpayments; that's never seemed tangible to me. Reaching this milestone however, does feel tangible as I can clearly see the balance every time I open the app. Which I've done more than usual over the past couple of days! I'm trying not to get too ahead of myself as there's still a long way to go, but I'm definitely on the right track. Next milestone will be in January when I hope to have cleared 1/2 of the loan. Slowly but surely, I'm getting there. It's a good feeling and I really didn't expect the psychological boost that came with it.

    A little blip on the horizon is energy bills. Initially, I'd planned to increase my direct debit again in July but, due to recent increased pay from unexpected overtime, I've doubled it from this month. I've seen that we should all be getting a £400 grant that'll be paid as a bill credit over six months from October but, at this point, I'm not holding my breath. Wasn't it originally a £200 loan to be repaid over five years? I'm not factoring this grant into my budget because what guarantee do we have to say that it's not going to change again? Honestly, with all the u-turns and wishy-washiness over the past few years, I'm just going to operate on the basis that this grant is not going to materialise and pay my own way. Goodness, I don't mean to sound ungrateful, it's just so mentally exhausting to expect and plan for one thing, only for it to then change completely. OK, enough complaining.

    Back to the positives: my emergency fund has increased by a fair bit more again as I've been paid for two weekends of overtime so far. There's another two that I've worked but am yet to be paid for and then a further three that I've still got to work. Next month I hope to say that I've hit the goal I set at the beginning of this year. And I thought it was ambitious back then! There are also murmurs at work that overtime will be made available for the foreseeable future as we are currently swamped and need to clear a huge backlog. I'm not going to kiss goodbye to my weekends just yet or count my chickens before they've hatched; but if this is confirmed to be the case, then it's going to make the world of difference. Here's hoping!

    Bottom line:

    £51735 owed

    £13265 / £65000 cleared

    Emergency fund: £2415 / £3000

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