Up for a laugh? A 23 year old's guide on how (not) to be mortgage free

Hi folks!

I'm a fervent reader of the MFW board, and have been meaning to get cracking on my own diary for some time to keep me on the MFW straight and narrow. Unfortunately, the time's never quite been right to do so before now; me and my partner are in a new build house which always seems to throw something up which we hadn't planned for (it's not just older houses y'know!).

Coming up to the new year, and reflecting on how much we've spent over Christmas (and how badly budgeted it was), I've been thinking a lot lately about seriously attacking the mortgage and now feels as good a time as any. Sooo, a little about us ...

We're both 23, and moved in to our house in mid-December 2016 in the north west. We're not rich - both earning just above minimum wage - but thankfully have nobody dependant on us financially and are fairly minimal in what we want. We've £127,879.52 outstanding on the mortgage - we've only made minimum payments on the mortgage until now - and the rate sits @ 2.34% expiring August 2018.

I'll post an SOA (a SOA?) below in a bit; mortgage OPs will initially be on the lower side as we're saving £1000 a month for a wedding too, but hoping we can scrabble together a couple of hundred more a month to put towartds OPs..

Wish me luck - if nothing else it should be a craic

:beer:
«13456723

Comments

  • Blibble
    Blibble Posts: 503
    Name Dropper First Post Combo Breaker First Anniversary
    Forumite
    edited 27 December 2017 at 8:00PM
    SOA below -

    Statement of Affairs and Personal Balance Sheet

    Household Information

    Number of adults in household........... 2
    Number of children in household......... 0
    Number of cars owned.................... 1

    Monthly Income Details

    Monthly income after tax................ 1202.87
    Partners monthly income after tax....... 1397.46
    Benefits................................ 0
    Other income............................ 0
    Total monthly income.................... 2600.33


    Monthly Expense Details

    Mortgage................................ 506.2
    Secured/HP loan repayments.............. 0
    Rent.................................... 0
    Management charge (leasehold property).. 25
    Council tax............................. 169
    Electricity............................. 38
    Gas..................................... 38
    Oil..................................... 0
    Water rates............................. 36.52
    Telephone (land line)................... 0
    Mobile phone............................ 14
    TV Licence.............................. 12.12
    Satellite/Cable TV...................... 0
    Internet Services....................... 29.99
    Groceries etc. ......................... 160
    Clothing................................ 25
    Petrol/diesel........................... 100
    Road tax................................ 15
    Car Insurance........................... 40
    Car maintenance (including MOT)......... 30
    Car parking............................. 5
    Other travel............................ 5
    Childcare/nursery....................... 0
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 5
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 7
    Contents insurance...................... 7
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 30
    Haircuts................................ 5
    Entertainment........................... 200
    Holiday................................. 40
    Emergency fund.......................... 100
    Total monthly expenses.................. 1642.83



    Assets

    Cash.................................... 9500
    House value (Gross)..................... 180000
    Shares and bonds........................ 0
    Car(s).................................. 1000
    Other assets............................ 0
    Total Assets............................ 190500



    Secured & HP Debts

    Description....................Debt......Monthly...APR
    Mortgage...................... 127880...(506.2)....2.34
    Total secured & HP debts...... 127880....-.........-


    Unsecured Debts
    Description....................Debt......Monthly...APR
    Total unsecured debts..........0.........0.........-



    Monthly Budget Summary

    Total monthly income.................... 2,600.33
    Expenses (including HP & secured debts). 1,642.83
    Available for debt repayments........... 957.5
    Monthly UNsecured debt repayments....... 0
    Amount left after debt repayments....... 957.5


    Personal Balance Sheet Summary
    Total assets (things you own)........... 190,500
    Total HP & Secured debt................. -127,880
    Total Unsecured debt.................... -0
    Net Assets.............................. 62,620


    Created using the SOA calculator at https://www.stoozing.com.
    Reproduced on Moneysavingexpert with permission, using other browser.


    A couple of comments -

    a) It's an honest SOA as an average over the last year - I'm not one for glossing over the fact that these numbers will need to change to keep up the level of saving we're after
    b) There are extra sources of income not accounted for in this SOA - roughly £60p/m from surveys is planned, as well as £175p/m or so overtime for me (provided work carry on being happy with me milking them at time and a half!). The grocery shop is also, hopefully, going to get reduced down as well as the entertainment & holiday budgets this year.

    Best see how it goes!
  • How does your pension provisions look?

    You'd expect a far better (and more tax efficient) return over the long term than paying off your very cheap mortgage.

    Good luck with your plan!
    Thinking critically since 1996....
  • newgirly
    newgirly Posts: 8,894
    First Anniversary Name Dropper Photogenic First Post
    Forumite
    edited 27 December 2017 at 8:05PM
    Hi blibble welcome :) well done getting a place at 23 nowadays let alone overpaying the mortgage :T

    The only thing that stuck out on your soa was the £300 pm management charge? Seems very high! Anyway all the best :)
    2022 MFW 67 - 33 month challenge to clear mortgage, month 17 completed and and extra 2 knocked off 🙂MFI3 No.12
  • Blibble
    Blibble Posts: 503
    Name Dropper First Post Combo Breaker First Anniversary
    Forumite
    Aye, but it's more exciting paying off a mortgage than putting money towards a pension!

    Pension contribution is deducted pre-tax from our salaries; haven't got the paperwork to hand but from memory it's only a small contribution (around £50p/m each). It's never been a priority as I've often thought "40 or so years to go", but is certainly something to turn my attention to at some point. :cool:
  • Blibble
    Blibble Posts: 503
    Name Dropper First Post Combo Breaker First Anniversary
    Forumite
    newgirly wrote: »
    Hi blibble welcome :) well done getting a place at 23 nowadays let alone overpaying the mortgage :T

    The only thing that stuck out on your soa was the £300 pm management charge? Seems very high! Anyway all the best :eek:

    Thanks :)

    And amended - £300 is p/a. Shouldn't be allowed to do finances after leftover Christmas prosecco!
  • newgirly
    newgirly Posts: 8,894
    First Anniversary Name Dropper Photogenic First Post
    Forumite
    Phew that's good! Sorry the scary face was supposed to be a smiley one :rotfl:
    2022 MFW 67 - 33 month challenge to clear mortgage, month 17 completed and and extra 2 knocked off 🙂MFI3 No.12
  • Blibble wrote: »
    Aye, but it's more exciting putting as much in to a pension!

    Pension contribution is deducted pre-tax from our salaries; haven't got the paperwork to hand but from memory it's only a small contribution (around £50p/m each). It's never been a priority as I've often thought "40 or so years to go", but is certainly something to turn my attention to at some point. :cool:

    Trust me, your 60 year old self will thank you for planning early! I'm ten years older than you sat on £130k in my pension. Personal cost to me has been ~£40k, the rest has been employer contributions, tax contributions and investment growth. You won't get that kind of return from paying off a 2.4% APR debt!

    Have a go at a few calculators and squizz at the pension board.

    There is a psychological factor to paying off your biggest debt quickly but the financial benefit to your self will come from the power of compounding and what this needs most is time!
    Thinking critically since 1996....
  • ricky_v
    ricky_v Posts: 330
    First Post First Anniversary Combo Breaker
    Forumite
    Aye, but it's more exciting paying off a mortgage than putting money towards a pension!

    Pension contribution is deducted pre-tax from our salaries; haven't got the paperwork to hand but from memory it's only a small contribution (around £50p/m each). It's never been a priority as I've often thought "40 or so years to go", but is certainly something to turn my attention to at some point. :cool:

    Which only costs you £34/month as there's a 32% tax and NI saving. Make sure you're at least matching the employer contributions to their maximum otherwise you'll be turning down free money (albeit free money you cannot access until your 57).

    Good luck! :)
  • newgirly
    newgirly Posts: 8,894
    First Anniversary Name Dropper Photogenic First Post
    Forumite
    I understand that financially in the long term putting extra to the pension is better than he mortgage, but it doesn't take into account other factors like perhaps job security, maternity leave etc.
    2022 MFW 67 - 33 month challenge to clear mortgage, month 17 completed and and extra 2 knocked off 🙂MFI3 No.12
  • New diary! MFW is also great fun!! And you get a great sense of achievement from it! You'll soon be addicted like the rest of us.
    MFW: Was: £136,000.......Now: £61,892.24......
    Mortgage Neutral Deficit: £43,082.90... Mortgage Neutral Savings: £18,809.34

    MFiT-T6 #13 - £3,517 of £15,500 (22.69%)
    1% Mortgage Challenge 2022 - £157.59 of £650
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.5K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.4K Spending & Discounts
  • 234.6K Work, Benefits & Business
  • 607.1K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards