Mortgage Free in 5 - 10 years

LegoHead

Thought I would start this diary to document the process. Previously had a debt free wannabe diary and that helped keep me on track thanks to all the feedback. Debt free since April.

Currently have the following state of affairs:

Mortgage Balance £136,858 at 1.22% for next 5 years
Emergency fund for 5 months bills
£1655 per month disposable income

So far overpaying £196/month off mortgage which should get me down to 20 years remaining

This leaves me £1469

I have been pretty tight on money for a while so want to allocate £75/week for play money which is a huge amount compared to what I usually have. I was planning on using this to fund some side hustles and buy goodies. = £375/month 

this leaves £1094 per month.

So now I have a choice of do I invest it all into Stocks and Shares ISA which I have had good experience with in the past or do I overpay more on the mortgage? Or both?

If I increase my mortgage overpayment to £280/month I will be at £100k remaining in 5 years.

If I put the last £1010/month into SSISA then in 5 years I will have deposited £60,600
With a little bit of careful planning I could potentially turn the £60k into £100k then pay off the mortgage.

I am prepared to take the risk as this plan overpays some of my mortgage and gives me a little fun money each week. Not really planning any major holidays in 5 years as I have travelled a lot already. My plan may also change in a year so my intention here is to get myself moving in a good direction and assess every now and again.

As I will be investing into the ISA I will be able to draw out money as and when I need it to buy a new car for example, if I were to put it all into mortgage overpayments this would not be possible.

nicola444

I would go with ISA as that could increase it faster and provide growth.  I have a similar plan and want to clear mortgage in next few years. 

savingholmes

HI - I followed your DFW diary previously. Well done for coming over to MFW. Great mortgage rate too. 

From the sound of it you could earn more interest in regular savers than over-paying your mortgage. Just a thought.

I get the stocks and shares ISA thing. But just wanted to ask about your pension provision and how far you are away from being able to access it. Depending on your earnings you could get 25% or more uplift from the government by paying into your pension - would help cushion stock market volatility. It might therefore be worth asking for some advice on the pensions board too - as that could be another way to become mortgage neutral / free.

LegoHead

savingholmes said:

HI - I followed your DFW diary previously. Well done for coming over to MFW. Great mortgage rate too. 

From the sound of it you could earn more interest in regular savers than over-paying your mortgage. Just a thought.

I get the stocks and shares ISA thing. But just wanted to ask about your pension provision and how far you are away from being able to access it. Depending on your earnings you could get 25% or more uplift from the government by paying into your pension - would help cushion stock market volatility. It might therefore be worth asking for some advice on the pensions board too - as that could be another way to become mortgage neutral / free.

Thanks for the info, will look into the pension idea. I would need to crunch numbers. 

I am 40 years young at the moment. To be honest my pension pot is negligible at the moment. 

Managed to secure the mortgage rate back in November as I thought rates were due to increase soon. Bit of a gamble.... but it could pay off.

Thriftmaster1973

Good luck, the thing I would say is stick with it.
It can be daunting at first when you don't think your making headway but after a few years when you look at the overpayments and the impact they have had on the debt, you'll become addicted.

Good luck!

savingholmes

If your pension is negligible - I'd at least post on the pensions board and get some advice. At 1.2% mortgage rate - you could earn far more in regular savers than you save in interest paid by over-paying. I'd resolve your pension and divert a good chunk to that. You've got enough disposable £ now to put some into long term savings so protected from stock market losses in the short term and in case you need it - and some to put into a decent pension. Think about when you'd like to retire and how much you'd need to live on and then start planning on how you can get to that number. The Times suggests saving 20% of your income at 40 if you have no pension but it all depends on how long you want to work for. 

LegoHead

Have not been here for a while. I bought a car last year as I thought it was too good to turn down and got a loan for it. I know... Debt free lasted April - August 2022. However I did plough every spare penny I had into clearing the loan off and as of tomorrow I will be debt free again.

Currently I have £1000 in emergency fund as I listened to the American guy Dave Ramsey and emptied my savings to pay off the remaining car loan a couple months ago. Ever since I have paid off as much as possible. Also have a credit card I was trying out for doing fuel and food shopping on, but it is too easy to overspend on this so ditching that next week too.

I am back here as I wonder if clearing the mortgage as quick as possible is the best thing for me. Not happy with the prospect of having to be sat in an office for the rest of my life and feel that clearing the mortgage and reducing my outgoings in future will help me explore alternative opportunities.

I earn good money and with my lodgers rental income I could put away £2000 / month into a stocks and shares isa and my emergency fund with a view to paying the mortgage off January 2027.

I think this is fairly low risk apart from the fact I could dip into my savings pot or investments could fall in value.

For my pension I am paying 5% me and 3% employer contribution. I also get yearly bonus (possibly) and will be sacrificing that straight into pension each year. At the moment my pension looks ok at state pension age so will be having to work till then, but with lower outgoings I could be flexible in what I do.

So here goes!

LegoHead

Probably good to have some mortgage figures.

Balance today is £133,736
Monthly is £503
interest on 5 year fix is 1.22% due to finish January 2027

savingholmes

Sounds like you are back on track.

LegoHead

Thought I would check back in. Got 3 months emergency fund sorted now. Cancelled the credit card and debt free again now.

Plan this month when I get paid is to create a buffer of £1000 in my current account that I will never go under.

Mortgage debt now £133,001.49

CountingPenniesClaire

Generally a bit of diversification in your savings/overpaying mortgage is good. It’s a bit boring I know because you don’t see big inroads but a bit in pensions, a bit in savings (stocks/cash - whatever you’re comfortable with) and overpaying or offsetting mortgage is generally a good idea.

Pension has obvious benefits as is tax free (especially so for higher rate) and depending on age can compound over the years and make a big difference but it is always a balance between living in the here and now and planning for the future. 

Whatever you choose to do, you’re asking the right questions and giving it the thought it deserves.