Mortgage free by '33

Langerhan

The year, not the age!

This is my first mortgage and it's been a year since I took it out. I've never really liked the prospect of being in debt but what with house prices being what they are, didn't have much choice if I wanted my own place. Last year after about a year of looking I exchanged on my first property: a one bedroom flat on the outskirts of London. I saved up for about a decade for the deposit as I knew I wouldn't be getting any help with it (apart from the 25% on my LISA!), so ended up being able to put down 35%.

I'm currently on a five year fix at 1.2% which expires December 2026. At the moment, it's impossible to predict what the mortgage market will look like then, and worrying about it means I'm trying to pay off as much as I can before that date. The early repayment fine kicks in if I pay off more than 10% of the outstanding balance in a year, so I'm keeping below that for now - haven't got anywhere close to it this year but might need to keep a closer eye on it in 2023.

My current monthly payment is £495 and I've set up a direct debit for another £495 a month on top of that. This month I was able to put in an extra £300 I got as a work bonus. I'm very OSM and my income is almost all from my day job, with my mortgage being my biggest outgoing by far. After I've paid my bills and put a little into savings, anything left at the end of each month goes to mortgage payments.

I don't drink, I'm not into cars and I certainly don't gamble, but my one weakness is travel. I love being able to get a train up to Edinburgh for an art exhibition, or jumping on the Eurostar to see the circus festival in Brussels. In case it wasn't obvious, I don't have kids or a wife... This diary is in part to remind myself why being mortgage free is better than getting on another Friday evening train. Here's what I've got so far:

• Paying interest, even at 1.23%, is wasting money which could be spent on visiting places. By paying off as much of this as soon as possible, I'll be able to spend my income more freely later on.
  
• Financial security means the ability to breathe. I'm the first person in my family to be able to get a mortgage. Owning the property outright will mean I can relax a bit more about it.
  
• I'm not looking to make massive sacrifices, just to think more critically about what else I'd be buying. Would £14 to own a book make me happier than the £19 (capital and interest) it would take off my mortgage?
  
• With how much rates have shot up recently, overpaying now will afford me some security a few years down the line.
  
• I don't want my money being used to invest in fossil fuels, the arms trade, or other killer industries. Paying off sooner means less available for Virgin Money to do that with.
  

I know Martin said in this week's newsletter that you should only overpay if your mortgage rate is higher than your hypothetical savings rate, and I do put money away into savings each month, but for now my mortgage is my priority. No way am I keeping it for another 24 years!

Langerhan

I got a paper statement in the post today as it's been a year since I exchanged. Certainly doesn't feel like it; I only figured out where the fuse box is a couple of weeks ago!

In the past year I've been charged £1406.80 interest and have paid back £12,358.02. Not sure why the 2p - looks like there were a couple of repayments this time last year I can't really remember which ended in strange digits. My remaining mortgage as of 30 September was £117,262.78.

jennystarpepper

Good luck with your journey, your comment about Virgin really made me laugh.

If I had not met Mr pepper (later in life) I'd probably be away much more with just a backpack for company, although travel has been suspended a little for me as I am hopefully going to be MF in the next 3/4 years, if life goes as planned.

Well done for getting on the property ladder, a bit of sacrifice does get you to your destination quicker.  

Langerhan

Thanks Jenny! Mortgage free in 3/4 years sounds incredible. Do you have a big journey planned afterwards to celebrate?

thriftyish

Langerhan said:

I got a paper statement in the post today as it's been a year since I exchanged. Certainly doesn't feel like it; I only figured out where the fuse box is a couple of weeks ago!

Good work on the overpayments, your comment on just finding the fusebox made me laugh. We have been in almost 3 years and have just found a switch that controls two outdoor security lights! 

Good luck with your journey, we are in the same position that we are racing to pay off as much as we can before our fix ends and we are at the mercy of the interest rates. 

IAAM

Good luck with your journey Langerhan. 

I will follow your diary with interest as your point about the freedom being mortgage free would give you in terms of travel, or enjoying life more fully, definitely align with mine. 

I would also prefer to apply critical thinking to my spending habits instead of taking drastic measures. Having said that, that position might change for me depending on how quickly my current approach brings down the mortgage debt.  

Best of luck

Langerhan

I've been doing some reading about the different interest rates available and I've started up a Principality Christmas Bond. I'm also going to set up a Green Savings Bond at the end of the year, as it's 3% on something which aligns with my values and doesn't require me to stand on one leg in Yorkshire while patting my head and studying to be a chemist. OK, I've not seen any accounts with requirements quite that specific, but some of them have seemed like a lot of faff for not much reward.

Obviously the highest rate of return would be on investment rather than interest but that's something I'm still learning about.

I've been a bit naughty this month as my brother was feeling down, so I booked some train tickets to visit friends in Europe to cheer him up. Since doing that, I've been much stricter on my budget than usual to try and make up for it: I've already done all my meal planning for December based on what's already in the cupboards, and I've been sticking strictly to what's in the pot for present buying and things like that. Had a slight hitch when my phone smashed and I had to get the screen replaced, but it was unusable rather than just irritating, so it wasn't really something that could wait.

Langerhan

Lots of people posting their resolutions on here today: mine is to bring the mortgage under £100k this year. Should be doable unless something big comes up which can't be covered by my growing EF.

My good news this week was that I hit the cashout amount on a survey site which let me take it in Tesco vouchers, so that's my food shopping for this month sorted.

Firegirl

Good luck in your mortgage free journey!

Langerhan

I was doing some maths the other day and if I continue with my monthly overpayments and also save £1550 a month, I'll be able to pay off my mortgage at the end of my five year fix. It's going to be difficult, but surely worth a shot.

For the next six months I'm going to be putting £1550 into Green Savings Bonds at the start of each month. The Green Savings Bond is a three year fix at 4.2%, so doing it for the next six months means that I'll be able to pour all of it into mortgage overpayment as soon as the five year fix ends. In September I'll have another look at what ethical savings accounts are around and whether I can comfortably afford to keep putting that amount somewhere else.

Langerhan

Got another £25 in Tesco vouchers today, which is going to help with the food shopping - especially since I forgot ground rent was due, leaving me with less than I'm used to for the rest of the month. It's funny having to be as careful as I was a decade ago but for entirely self-imposed reasons this time. Just the regular overpayment this month, bringing me down to £109,411.86. Only a couple of months until it's £20k lower than it was at the start.