JJs Mortgage Free Journey

MFW2024

Hi All, thanks for having me and welcome to my new diary.

I wanted to start this diary to really try and keep myself on track to get Mortgage Free by 45. It's a big aim for me and our family and I want to be much more strategic about how I do this. We are currently in the very fortunate position that I can comfortably afford to pay off a significant amount each month.

 However this also provides it's own challenges as I have a family and myself that we haven't really had to budget or significantly worry about our spending.

Family Unit of Myself, OH, 2 children aged 6 and aged 2. This means there's always big outgoings that are unaccounted for every month and why might see I'm a bit unclear!

Where I'm at now?

Aged 36 aim to be Mortgage free November 2032

Mortgage Balance Remaining: £321000

Original Mortgage: £389000 (December 2020)

Redemption Date: January 2046 (21.4 years)

Monthly Mortgage payment: £1858

Current Overpayment: £400 pm

Some bits I wouldn't mind advice on from people's own journeys:

Being clearer on the how: 

How do I know how much I need to be paying off to achieve this aim?

My overpayments aren't consistent and I want to be thinking over multiple years with overpaying.

I have the ability to pay off a good chunk each month extra (maybe up to £750 per month) but I also get bonus and share payments at different points every year so could get up to c. £15000 extra in overpayment.

Savings for Kids:

We save £200 per month between our 2 children, but could obviously pay this towards the mortgage instead, what does everyone do personally on this?

Mortgage Balance Remaining: £321000

Original Mortgage: £389000 (December 2020)

Redemption Date: January 2046 (21.4 years)

Monthly Mortgage payment: £1858

Current Overpayment: £400 pm

Thanks for reading

South_coast

Hello and welcome to the team 😀

I can't offer any suggestions on the money for children question, but the MSE overpayment calculator (I've tried to post a link, but it's not working 🙄) suggests you need to be averaging £2k a month in OP's if you want to clear the balance in 8 years. I'd suggest having a play around with it and seeing what works for you

APWhiteSavvy

What's the 4 year age gap between the kids been like? We're currently debating having a second, and have a 2 year old daughter. Completely undecided on what to do and given ourselves a deadline of end of year to come to a decision. (Wife doesn't want to give birth age 35 or higher due to health risks - personal choice).

APWhiteSavvy

"We save £200 per month between our 2 children, but could obviously pay this towards the mortgage instead, what does everyone do personally on this?"

All our daughter's gifted money goes into a Junior ISA. Grandparents wanted something safe and secure so for their peace of mind it's all in a NS&I account at 4% interest. Could very likely get more elsewhere but it's fine. I do also pop a small amount into a S&S ISA with Vanguard but have now stopped at the £1k mark and letting it grow.

I don't know what she will be like aged 18 - I could put more money in it but:

1) she might be irresponsible and blow the money on silly things like I did when I was that age
2) The money going into her JISA is post-tax, so I could get a lot more from it if I put it in my own pension, and then gift her at my discretion when I retire and take the tax free lump sum...

So we've decided further family gifting will go in her NS&I. We'll leave the Vanguard to just grow and do it's thing, and focus on our own finances with the aim to benefit her later on down the line when she needs it.

MFW2024

South_coast said:

Hello and welcome to the team 😀

I can't offer any suggestions on the money for children question, but the MSE overpayment calculator (I've tried to post a link, but it's not working 🙄) suggests you need to be averaging £2k a month in OP's if you want to clear the balance in 8 years. I'd suggest having a play around with it and seeing what works for you

Thanks for the welcome Yes this is roughly what I saw as well, I'd love a calculator that lets you make regular monthly overpayment and annual lump sums but I think just using the 2k per month as an average is easy enough. For us that might look like a £750 month regular overpayment, then a lump sum around 15k per year (all as the aim!!!)

MFW2024

APWhiteSavvy said:

What's the 4 year age gap between the kids been like? We're currently debating having a second, and have a 2 year old daughter. Completely undecided on what to do and given ourselves a deadline of end of year to come to a decision. (Wife doesn't want to give birth age 35 or higher due to health risks - personal choice).

Hi thanks for reading  

I'll be completely honest we have found it quite tough - But I don't think it's the age gap!! 
 I do think a lot of that has been the way the kids are - our second has just been a lot more challenging to look after than our first and it's the whole thing that you always have two things to be thinking about.  

And it has been amazing watching our daughter be so caring and helpful as she's got older even with a bit of a terror sibling haha

MFW2024

APWhiteSavvy said:

"We save £200 per month between our 2 children, but could obviously pay this towards the mortgage instead, what does everyone do personally on this?"

All our daughter's gifted money goes into a Junior ISA. Grandparents wanted something safe and secure so for their peace of mind it's all in a NS&I account at 4% interest. Could very likely get more elsewhere but it's fine. I do also pop a small amount into a S&S ISA with Vanguard but have now stopped at the £1k mark and letting it grow.

I don't know what she will be like aged 18 - I could put more money in it but:

1) she might be irresponsible and blow the money on silly things like I did when I was that age
2) The money going into her JISA is post-tax, so I could get a lot more from it if I put it in my own pension, and then gift her at my discretion when I retire and take the tax free lump sum...

So we've decided further family gifting will go in her NS&I. We'll leave the Vanguard to just grow and do it's thing, and focus on our own finances with the aim to benefit her later on down the line when she needs it.

This is very interesting, I've started clear of the JISA based on your point that they control it at 18 - so if we save £25k and she can do what she likes at that age I think it could be trouble. However the JISA rates and choice etc are way better as you said 

The other way I thought about I was if £200 more goes on the mortgage and I paying it off a year quicker and have money to use for that instead when mortgage paid?

MFW2024

Been a busy week and away with work for 2 days, but plenty of time thinking about this!

Have decided to go ahead and increase my standing order to £600 overpayment per month for now, not quite where I want it to be but it's close, and if it feels ok then think I could get to the 750!

Was discussing with OH last night and she thinks maybe a bit fast to try and do in 8 years, but aim high, right?

Rich1976

On the flip side of all that, many people would say it’s not a good idea to overpay the mortgage if you can get better results putting the money each month into a stocks and shares Isa ( which should grow by more than your mortgage rate each year and allow you to pay a lump sum after say 10 years into the mortgage ), or into a savings account.

what is your savings provision looking like for emergencies, and future needs such as new cars, holidays, home maintenance etc?

Also what are your pension provisions like? If you are not saving enough for retirement you may be best to divert some of the mortgage overpayment into workplace and/or personal pensions.

MFW2024

Rich1976 said:

On the flip side of all that, many people would say it’s not a good idea to overpay the mortgage if you can get better results putting the money each month into a stocks and shares Isa ( which should grow by more than your mortgage rate each year and allow you to pay a lump sum after say 10 years into the mortgage ), or into a savings account.

what is your savings provision looking like for emergencies, and future needs such as new cars, holidays, home maintenance etc?

Also what are your pension provisions like? If you are not saving enough for retirement you may be best to divert some of the mortgage overpayment into workplace and/or personal pensions.

Hi Rich - yes definitely considered your first point as an alternative, and will continue to think about it and what's the best route - maybe some of the annual lump sum goes in that and continue to 'hedge bets' by overpaying monthly. I'm also reasonably well invested in the stock market through my company (albeit not the same as having an index fund, I feel it's  giving me another outlet to grow that cash).

Well covered with a reasonably big savings pot in Premium Bonds / ISAs etc to cover a year's normal expenses and some.

Pension is interesting one, I have a pretty decent pot already and am at my company's match rate. In addition, from a personal point of view I'm not really interested in maxing these out like some people suggest. I feel I'd be better off trying to have a great investments that I can use whenever I want and that I'm in full control of and not stuck at a whim of the government of the day (eg I plan to try and retire early and the way things like this are heading I think Private pensions will be 60+ before you can take them when I retire (already heading to 57/58 I believe?).

APWhiteSavvy

MFW2024 said:

APWhiteSavvy said:

"We save £200 per month between our 2 children, but could obviously pay this towards the mortgage instead, what does everyone do personally on this?"

All our daughter's gifted money goes into a Junior ISA. Grandparents wanted something safe and secure so for their peace of mind it's all in a NS&I account at 4% interest. Could very likely get more elsewhere but it's fine. I do also pop a small amount into a S&S ISA with Vanguard but have now stopped at the £1k mark and letting it grow.

I don't know what she will be like aged 18 - I could put more money in it but:

1) she might be irresponsible and blow the money on silly things like I did when I was that age
2) The money going into her JISA is post-tax, so I could get a lot more from it if I put it in my own pension, and then gift her at my discretion when I retire and take the tax free lump sum...

So we've decided further family gifting will go in her NS&I. We'll leave the Vanguard to just grow and do it's thing, and focus on our own finances with the aim to benefit her later on down the line when she needs it.

This is very interesting, I've started clear of the JISA based on your point that they control it at 18 - so if we save £25k and she can do what she likes at that age I think it could be trouble. However the JISA rates and choice etc are way better as you said 

The other way I thought about I was if £200 more goes on the mortgage and I paying it off a year quicker and have money to use for that instead when mortgage paid?

Or, depending on your age, put it into your pension instead.
Everything into your mortgage or JISA is post-tax, so you are taxed on it at 20% or 40% and then you are putting it away for a growth of 4% a year.
However, if you put it into your pension, you can claim that back as tax relief (20% automatically, additional 20% through writing to HMRC or self assessment depending on your salary.
Plus the (at least) 4% growth per year. 
If you then "retire" at 57, you can take 25% of that total back out tax free and gift to your children a whole lot more than the JISA, and you have more control over that gifting and how they receive it.
It just depends on timing and what age they will be at the time of your retirement. Early 20s is a sweet spot for a first house deposit etc.