Journey to mortgage freedom

FIREdoc · 31 October 2018 at 5:07PM

Hi MFW gang!
New to the board, but loving reading all of your stories and know I could use some motivation and accountability! I'm a Junior Doctor in my 30s who lives with my husband (not a doctor!) in our lovely new home. We're currently child free so now's feeling like a great time to hit the mortgage hard.
Money summary to follow! :j

FIREdoc · 31 October 2018 at 5:09PM

So... the hard numbers...
We were fortunate enough to put down a 15% deposit on our £250,000 home earlier this year, and we're now staring at a £207,500 remaining balance. We're fixed for 5 years, can overpay up to 10%, so the stretch goal is to get to 50% original value by the end of this time (i.e. £125,000). My back of an envelope calculations mean a balance of £195,000 after the first year and we'll be roughly on track for this goal. We have an emergency fund of £10000 in place and no other debts. We saved pretty hard over the past couple of years for the deposit, so feel there should be enough flexibility in the budget that this isn't completely impossible...
Tell me this isn't crazy?!

FIREdoc · 2 November 2018 at 12:23PM

So I've been saving £250/m into a regular savings account for the past year, that matures the middle of the month. Missed a month somewhere along the way (blame the house move expenses!) , but can hopefully top it up to make a lump sum £3000 payment off the mortgage... exciting! Now to decide whether we should set up a regular OP or keep track of things a little more with lump sum payments.

bexster1975 · 2 November 2018 at 12:36PM

Hello

Sounds like you have the makings of a plan.

Do you have an emergency fund?

Are you saving elsewhere for retirement etc?

Is £250 all the extra you can afford to throw at the mortgage?

Have you done a statement of affairs so you know where all your money goes every month?

Lots of questions, but the above are a place to start if you'd like to get serious with OPing quite a big mortgage.

Good luck

Bexster

FIREdoc · 2 November 2018 at 12:44PM

Hi Bexster! Thank you for your thoughts! To be honest, it's tricky figuring out the exactly where I am at the moment - recent job change, lots of extra expenses with moving, and OH might have a gap in employment on the horizon too. Keeping £10000 aside for emergency (unpredictable) expenses, and have a pot for inevitable (but not necessarily time predictable) expenses/savings (car getting a bit older, laptop getting a bit knackered, know we want to go on holiday in the Spring, still need some larger bits of furniture for the house) of £4000. Think if things are stable (both of us on same wages), we could probably hit OP of £1000/m, but would probably need to have a month or two off for extra holidays/luxuries etc. I'll look at the SOA, thanks for the advice and luck - reckon I'll be needing it!

FIREdoc · 2 November 2018 at 12:49PM

Oh and thoughts on retirement - hoping to retire (or at least dramatically cut down hours!) earlier than in my 70s (when I reckon pensions will kick in for a youngun like me

), but step one for me is getting rid of a mortgage so expenses in retirement as low as possible. From there, need to look at proper investing - I know intellectually, my ROI would likely be better in stocks and shares than going into OPing the mortgage (esp with such low interest rates at the moment), but for me the mortgage is such a psychological barrier to thinking about early retirement, so thats where I'm focusing first. Pay into the NHS pension scheme, but other than that no more set aside for this quite yet.

bexster1975 · 2 November 2018 at 1:07PM

Excellent re: emergency fund. I appreciate if money is a moveable feast this will be tricky to pin down immediately. £1000 p/m would be a very impressive OP. I think a couple of months off for good behaviour each year is acceptable.

As for retirement saving, I'm fully on your side. I am about ten years older than you and agree that it's unlikely that we will see pensions much before 70 ( even for this slightly less young 'un!) I paid my mortgage off so I could leave employment and work for myself. I already work much fewer hours than I did. Am now working on designing earnings that I don't need to do anything to earn! NHS pension is a great place to start. Just useful to put something away for a long term investment whilst time is your friend

I'm sure you won't need luck. A plan is always the better choice if you need yo have one or the other.

I'll follow with interest

Bexster

greent · 2 November 2018 at 10:05PM

Hello and welcome!

Have you got a spreadsheet set up? 0 you can then play with payment figures and see the difference payments make over time - can be quite addictive

We're rather older than you (heading towards 50 in less than 2 years :eek:) but agree that paying off the mtge was a massive psychological thing - for us it was ahead of more 'sensible' decisions re investing alongside it. Now that our mtge is gone we are paying off the BTL mtge and also started a(another)small pension each and S&S ISA - and spent on holidays etc - plus have 2 of our children in uni, so that costs us rather a lot.....

I look forward to following your journey

beanielou · 3 November 2018 at 8:28PM

Happy shiny new diary

FIREdoc · 5 November 2018 at 5:46PM

Hi greent and beanielou, and thanks for the welcomes! Yes, we have our mortgage with natwest and they have a handy calculator on their website that's huge fun to plug in numbers and see what happens! Weirdly though, I've made an overpayment and it seems they can't cope with reducing the term, so automatically reduce the monthly payment, then can top it back up with a monthly overpayment to the original amount. So I think I have two sets of overpayments to keep track of, that might be a problem if I get close to the 10% annual limit. Is this something anyone else has come across before?!!

Poppycat1 · 5 November 2018 at 10:22PM

Hi FIREdoc, I had to phone my mortgage provider with my first overpayment, I was too inpatient to wait for online banking paperwork to come through. I was offered to either reduce the term and keep mortgage payment the same or keep the same term and reduce the payment each month.

I also have a 10% overpayment limit and want to pay as much off as possible so asked them to keep the monthly payment the same. I think you should give them a call.

Good luck, I have just started a diary with similar goals to you re paying off the mortgage and working less. I also work for the NHS but in a much lower grade. I now work bank shifts and work when I want to.

Journey to mortgage freedom

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