Pay off my mortgage in 5 years

buzzyzoe · 12 February 2016 at 3:20PM

Hi all,

Thought I'd start a diary to try and give myself some extra motivation.

I'm 25 and bought my first property in 2014. After a year or so of settling in, doing up the place and working out a budget, I then started overpaying my mortgage in August 2015.

My mortgage debt started at £72995 and currently stands at £56934. So I've got £11386.80 to pay off each year to be mortgage free in 5 years!

My standard payments are £376 per month and I'm aiming to overpay around £1000 per month. I'm earning considerably more than I was when I first moved in and hopefully my salary will go up pretty regularly. I work in TV so it's all contract based, and tends to go up with each new contract.

I'm really overhauled my budget in the last year or so, and have been using YNAB to track my spending and forecast for the future. I have changed suppliers to the cheapest options available, gone SIM only with my mobile and starting using lots of coupons and cashback for food shopping.

I think the struggle is going to be keeping the motivation up for such a long time, although I am still extremely motivated at the moment. I thought this diary might be a good way of keeping myself focused on the goal

Kittenkirst · 12 February 2016 at 7:34PM

Hello!
Sounds like you have been doing fab so far so really well done!
I will keep popping by to cheer you on :-)

A_Frayed_Knot · 12 February 2016 at 7:46PM

Hi and welcome :wave:

Sounds like you have it all worked out, just one thing to mention, make sure you are allowed to o/p by this huge amount, as most allow 10% of the total mortgage at the beginning of the year as a rule, however there are some that allow more than the 10% total rule.

Unless you are in a short fixed rate, then you can always wait till the end of that, then o/p as much as you like.
What's your term/interest rate?

Flower1976 · 12 February 2016 at 10:42PM

Hi there
To clear that much in such a short time is great.
I agree make sure there are no penalties.
Anything that would take you over your allowance, you could put in savings until you are allowed to pay them without charge.
One way I keep motivated is to work out what the balance will be at the end of each year so you know what you are working towards.

Good luck
Flower

beanielou · 13 February 2016 at 10:41PM

% years is not long at all

EatingTheElephant · 14 February 2016 at 8:24AM

Good luck on your journey. Do you have any long term plans for moving after becoming MF ?

ecoelle · 14 February 2016 at 8:33AM

Morning,just spotted your diary. We are also on a MF journey, although slightly longer than yours I hope we can be MF in 10 years.

I am also interested in what you plan for once you are MF?

I know some people it is to do with their wanting to leave work, others want to have the flexibility in their finances to pay for traveling, so what's your motivation? Focusing on this may help you to strive for that end goal when the going gets tough.

Definitely check out any penalties, we found we could OP by 10% of the outstanding balance each year. We decided if ever we had more money, than they would allow us to pay penalty free, then we would put it into a high interest savings account/bond/ISA whatever was paying the best rate at the time and then wait until we could pay it. Also it's worth checking whether you pay interest daily or yearly. If it's daily then make your OP's as soon as you have the money available, eg every payday but if you pay your interest annually make sure you save your OP's in a high interest account until just before the interest calculation date and then pay it in a lump sum. This way you can earn interest on it and still make the best savings on the annual interest charge on the mortgage.

buzzyzoe · 15 February 2016 at 2:54PM

Hi all,

Thanks so much for your nice replies! I wasn't expecting so many

To answer a few questions:
- It's a flexible offset mortgage with Santander, so I have a 'Savings Pot' that I pay money into that is essentially the same as overpaying, and reduces the interest I pay. There are no limits on frequency/amounts of deposits into this pot.
- My term started at 25 years so is now at just over 23 years. When I took out my mortgage, I just went with the standard term but if I was to remortgage or take out another mortgage, I would definitely decrease the term. My interest rate is 3.79% which is pretty rubbish but it's mainly down to the fact that I work in television and so am in contract based employment, changing jobs every 3-6 months.
- My plan for becoming mortgage free is then to save up to buy a rental property. I love the idea of having this as a second income. As I am unlikely to build up much of a pension due to the field I work in, I would like to have a rental property portfolio to act as my pension.

Made some good savings this weekend with a coupon shop, and stayed in with my boyfriend and cooked us a nice Valentine's meal last night instead of going out (using some of my couponed ingredients!) Today's lunch was a free soup with a coupon. I am technically working 2 jobs at the moment, my main full time job which I've recently started, and finishing off some paperwork from my old job (which I'm doing evenings and weekends). I did a big chunk on Saturday so although I've lost a weekend day, I'm thinking of the extra money due in soon and the lump sum I'll be able to pay off with it!

TeamPlum · 15 February 2016 at 3:10PM

Congratulations!

Where in the country are you located? Might be obvious, but have you checked that you can pay that amount of money a year without being charged for overpaying?

For example, I can only pay off 10% of the value a year, without getting stung on charges.

Sorry if I'm stating the obvious!

Gen_Y_Saver · 15 February 2016 at 5:14PM

Hi buzzyzoe

Congratulations! You've made some impressive progress.

I am on a similar track to you. I aim to be mortgage free before I'm 30.

You should add an "interest saved" field into your signature like mine. I helps motivate me on my off days.

Best of luck

Gen_Y

buzzyzoe · 16 February 2016 at 5:51PM

TeamPlum I am London based.

Definitely fine to make unlimited overpayments. In case anyone's interested, here is the wording regarding that as I just doubted myself and had to look it up again!

You may make lump sum or regular overpayments up to the amount of the outstanding mortgage balance. Overpayments must be allocated to your savings account or your mortgage account. If you make an overpayment into your mortgage account or transfer money there from your savings account, the amount you owe and the interest you pay will be recalculated immediately.

Gen_Y_Saver, thanks for the tip! How do you work out the interest saved?

So today I had another free soup for lunch and also received a refund for something I returned, plus a cheque from my old mobile supplier (which I've recently changed to go sim only) which was a nice surprise as I wasn't aware I was owed anything! I was happy enough with the reduction of my mobile bill from c. £40pm to £15! Not sure how long my current phone will last as I use it pretty constantly for work but going to keep it going as long as I can before I go for another contract

Pay off my mortgage in 5 years

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