65k in 65m
in Mortgage-Free Wannabe
11 replies 507 views
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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