Ready to embrace a mortgage-free journey

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  • Karmacat
    Karmacat Posts: 39,460 Forumite
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    A great post!  Knowledge is power, and now you've got it, about your personal finances, goals that once seemed impossibly ambitious are now within reach, that's wonderful!  And I think you're very wise not to try to suddenly impose intense frugality onto Christmas - keeping to regular habits, yes, but not new extras at this time of year, when so much else is going on.
    2023: the year I get to buy a car
  • savingholmes
    savingholmes Posts: 27,347 Forumite
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    Really like the rapid progress in your thinking over the short time you've had your diary.

    Just to throw in another curve ball - have you looked at whether you could do AVCs and use that to create  a tax free lump sum to pay off your mortgage - that way you get around 25% tax relief and it moves you forward more quickly. 

    I am doing a combination. A small OP. Some regular savings as I have a low EF and have started AVCs. The way my pension works is as long is it isn't worth more than 25% of my total pension I can take all the AVC part tax free.
    Achieve FIRE/Mortgage Neutrality by mid 2030
    1) MFW Nov 21 £201,999 with 237 payments to go - now £184,341 Equity 26.26%
    2) Spend on handyman & external building works & new patio door £11.9K
    3) CC £3.9K on 0% spends card but offset by £34.1K savings (part EF, part future home improvement)
    4) Mortgage neutral by June 2030 AVC £9.6K/£127.5K AVC target 7.5% value @15/4
    5) FI Age 60 annual income target £13.7/30K 45.7%
  • IAAM
    IAAM Posts: 95 Forumite
    First Anniversary Name Dropper Combo Breaker First Post
    Thanks KC 😊- knowledge is definitely power and this is where the MF wannabe forum is fantastic! So many different journeys by such a friendly and supportive group, and lots of helpful tips and advice from people along the way. 

    Saving Holmes - Thanks for the curve ball - I love having new ideas to think about 😊. At the start of my journey, I thought I would simply be paying more money to my lender each month. In contrast, I'm currently maintaining my existing OPs, but now paying into a regular saver as the interest rate on that is so much higher than my mortgage rate.

    AVCs are a great idea and, like you say, my investment would immediately be 25% better off due to the tax relief on the contributions. My initial thought is that I'd be slightly nervous about how well the investments perform. 
    However, your post encouraged me to review this again. I already have a DC (Defined Contribution) pension and it had been fluctuating quite dramatically in the last few months. However, I did the maths just now and (at its worst) it only dropped by l0% and it is now recovering.

    Whilst we can't tell what will happen with any of our investments in the future, I guess the bottom line is that, if contributions are immediately uplifted by 25%, then poor investment returns don't immediately impact you because you have a buffer in place.

    I really like your idea of having a diverse approach to paying off your mortgage. The safe, straightforward approach of directly OPing your mortgage; then capitalising on the current savings rates by having regular saver accounts and then taking advantage of the pension tax relief on AVC contributions by doing those. I think I'll spend the next couple of months to work out how I apportion direct OPs; regular savers and then the option of paying into an AVC. Thanks again!
    Mortgage Balance: £162,615.84 (December 2022); £163,945 (November 2022)
    Current MF date: Feb 2032.  (Previously: Jan 2033)

    Target MF date: May 2027
    (Overpayments needed to achieve this: £1,750pm!) 

    Joint spend: £391.09 (Nov)
  • savingholmes
    savingholmes Posts: 27,347 Forumite
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    Glad you found it helpful. I feel like I'm on a training bike still... 
    Achieve FIRE/Mortgage Neutrality by mid 2030
    1) MFW Nov 21 £201,999 with 237 payments to go - now £184,341 Equity 26.26%
    2) Spend on handyman & external building works & new patio door £11.9K
    3) CC £3.9K on 0% spends card but offset by £34.1K savings (part EF, part future home improvement)
    4) Mortgage neutral by June 2030 AVC £9.6K/£127.5K AVC target 7.5% value @15/4
    5) FI Age 60 annual income target £13.7/30K 45.7%
  • IAAM
    IAAM Posts: 95 Forumite
    First Anniversary Name Dropper Combo Breaker First Post
    Savingholmes - I think it's always good in life to feel like you're on a training bike. It shows an open mind and that we are always striving to do better and to learn more :-)

    I've just done some number crunching and have discovered that the OPs to achieve my target MF date have increased from £1250pm to £1750pm. Eeek. I'm not sure if it was my dodgy maths, or whether I had a different MF date when I did the figures. Either way, £1750pm is currently WAY out of our league but it's really important to aim high, isn't it?

    I've updated my signature box to reflect this anyway and I'm really keen for February to arrive so that I can seriously ramp up the current OPs and savings. 
    Mortgage Balance: £162,615.84 (December 2022); £163,945 (November 2022)
    Current MF date: Feb 2032.  (Previously: Jan 2033)

    Target MF date: May 2027
    (Overpayments needed to achieve this: £1,750pm!) 

    Joint spend: £391.09 (Nov)
  • Karmacat
    Karmacat Posts: 39,460 Forumite
    Name Dropper First Post First Anniversary
    Yikes to the new overpayment aim!  Erm, how far away are you from that?  It's awfully hefty  :*  but best of luck with it - yes, a high aim can really help you along, if you have the time and energy for it.  Go you!
    2023: the year I get to buy a car
  • savingholmes
    savingholmes Posts: 27,347 Forumite
    Name Dropper First Anniversary Photogenic First Post
    That's a hefty OP goal. 

    What can you do to bring in more income and cut costs?
    Achieve FIRE/Mortgage Neutrality by mid 2030
    1) MFW Nov 21 £201,999 with 237 payments to go - now £184,341 Equity 26.26%
    2) Spend on handyman & external building works & new patio door £11.9K
    3) CC £3.9K on 0% spends card but offset by £34.1K savings (part EF, part future home improvement)
    4) Mortgage neutral by June 2030 AVC £9.6K/£127.5K AVC target 7.5% value @15/4
    5) FI Age 60 annual income target £13.7/30K 45.7%
  • IAAM
    IAAM Posts: 95 Forumite
    First Anniversary Name Dropper Combo Breaker First Post
    Hi both - I agree that it's a pretty monumental figure!!

    On a daily basis, it definitely isn't achievable for us to save that amount each month. However, I've got 2 pensions where the tax-free cash can be taken in 2027 and that totals £25,000. In addition to that, we've got £38,000 in Premium Bonds which could also be used to pay off the mortgage then.

    If we did decide to use these amounts to pay off the mortgage in 2027, our target OP for the next 5 years would be about 560pm in the meantime, which is definitely achievable.

    However, we obviously want to do everything we can to avoid using the pension cash sums and the premium bonds - but it does highlight that, in 5 years' time, we might have other choices open to us if the OPs are less than we'd hoped.

    From my perspective, that just serves as an added incentive as I definitely don't want to have to give up the £25,000 from my pension and we do like having our Premium Bonds, so we need to get as close to that elusive £1,750 as we possibly can.

    But that's a great "exam question" from you both: i.e. what's the plan?!!! :-)

    We've obviously worked out what OPs we can currently make on our salaries (as a starting point) and, in addition, I'm now reining in our joint spend. This is already showing great results (and there's much more we can do to cut back spend on our joint finances, as well as our individual expenditure)

    However, to answer the question, some income sources that will help towards our target OP include:
    1) Premium Bond wins - not guaranteed of course, but this tends to average about £700 pa;
    2) Interest on my regular saver accounts = approx £99 pa
    3) We have a joint credit card which gives us cash back each January (and an annual £10 c/back bonus) = approx £43 pa
    4) I recently took out a Chase bank account which will give me about £80 in cash back over the next 12 months
    5) I plan on switching banks again this year which should generate between £175 - £200 (not guaranteed as any of the current cashback offers could be withdrawn at any time)
    6) In my Top cashback account, I'm currently owed £28 but my car insurance is due at the end of February and that usually adds a nice little extra
    7) Our solar panel income - this is pretty small as it's only about £50pa but it all helps

    The annual total of the above income is about £1175. Admittedly, a large chunk of this is Premium Bond wins which are definitely not certain. However, we've had our Premium Bonds for a very long time and (so far!!), we've had a reasonably reliable "return" from them.

    I plan on having a real think about areas where I could increase our income further and hopefully I'll come up with some ideas over the next few days. (Of course, if I went down the route of paying some money into an AVC then I've automatically increased by initial investment by 25%, so that helps).










    Mortgage Balance: £162,615.84 (December 2022); £163,945 (November 2022)
    Current MF date: Feb 2032.  (Previously: Jan 2033)

    Target MF date: May 2027
    (Overpayments needed to achieve this: £1,750pm!) 

    Joint spend: £391.09 (Nov)
  • savingholmes
    savingholmes Posts: 27,347 Forumite
    Name Dropper First Anniversary Photogenic First Post
    Quite a big gap then. Good you have pensions as options - but unless they are part of a deliberate plan - definitely good to explore other options too. 

    What kind of savings have you made on your budget so far?
    Achieve FIRE/Mortgage Neutrality by mid 2030
    1) MFW Nov 21 £201,999 with 237 payments to go - now £184,341 Equity 26.26%
    2) Spend on handyman & external building works & new patio door £11.9K
    3) CC £3.9K on 0% spends card but offset by £34.1K savings (part EF, part future home improvement)
    4) Mortgage neutral by June 2030 AVC £9.6K/£127.5K AVC target 7.5% value @15/4
    5) FI Age 60 annual income target £13.7/30K 45.7%
  • South_coast
    South_coast Posts: 4,913 Forumite
    First Anniversary First Post Name Dropper Photogenic
    Less of a gap than if you hadn't started at all though 👍👍👍 You've made great strides already
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
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