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  • FIRST POST
    • Niv
    • By Niv 7th Aug 18, 8:55 AM
    • 1,704Posts
    • 1,526Thanks
    Niv
    A question to the mortgae free wannabe's
    • #1
    • 7th Aug 18, 8:55 AM
    A question to the mortgae free wannabe's 7th Aug 18 at 8:55 AM
    Hi All,

    I, like most (all) of you wish to be mortgage free. I dislike having that axe above my head and after moving a couple of years ago that goal seems further away than ever.

    I am not put off though, I have a 30year mortgage, purposely so as it gives me more flexibility than a shorter term mortgage. I aim to pay if off in 20years max and am on track for that.

    I am often impressed by the amounts people are overpaying each month and wonder how they manage to live while overpaying such amounts. It may be they have wonderful salaries or they really do cut everything else to the bone.
    What my question is to you is, what are you sacrificing to make your goal a reality? To break that down, I mean; other than emergency fund do you save cash, do you invest, do you go on holidays away, do you contribute the max to your pension (by max I mean max a company pension may allow rather than the allowance !!!8211; but feel free to answer either way), how significantly do you go without etc.

    The reason I ask is twofold; I wonder if I should be overpaying more and sacrificing more, and are people missing a trick in that I mean, by making the mortgage their only goal are they losing out on greater financial rewards.
    From a feeling point of view I cant imagine there is much better feeling than knowing your home is paid for and no one can take it from you come rain or shine, however from a financial point of view is overpaying to pay off asap the best financial decision?

    This is not a post to try and derail / demotivate anyone on this journey, nor is it to suggest what you may be doing is not the right thing to do, I am merely asking the background. I really want my mortgage gone too but am I prepared to stop other investments to make it so? No, not right now as financially it seems naive !!!8211; in my position.

    Anyway, I have gone on enough, over to you.
    YNWA

    Target: Mortgage free by 58.
Page 1
    • Tropically
    • By Tropically 7th Aug 18, 10:20 AM
    • 310 Posts
    • 1,055 Thanks
    Tropically
    • #2
    • 7th Aug 18, 10:20 AM
    • #2
    • 7th Aug 18, 10:20 AM
    Sounds like you should read some diaries!!

    Some people have good salaries, some people have a low cost of living, but mostly it comes from a dedication to overpaying the mortgage, a rejection of 'keeping up with the joneses' and satisfaction at seeing that mortgage amount go down.

    I see overpaying as a 'safe' investment within a range of investments that I make each month. Money saved is money earned. Overpaying the mortgage is 1.79% interest guaranteed for me. But, it's also a concentrated risk forming a large portion of my portfolio, but I also need a place to live. Fit overpaying into your risk profile.

    I maximise my pension. My tax rate is higher than my mortgage rate, it makes sense to contribute as much as reasonably possible to my pension. I also invest, and also go on holidays
    Mortgage started at £318,000 in June 2016. Original MF - 2041
    2017 OPs: £7000/£7000
    Mortgage in Nov 2017 - £297,808
    • julicorn
    • By julicorn 7th Aug 18, 12:08 PM
    • 459 Posts
    • 1,686 Thanks
    julicorn
    • #3
    • 7th Aug 18, 12:08 PM
    • #3
    • 7th Aug 18, 12:08 PM
    For me, overpaying the mortgage is a way to increase equity in our home, so that we can have a larger deposit for what will hopefully be our forever home in 5/6/7 years time (we're currently in a 1 bed flat, because that's all we can afford here in Brighton).
    We don't currently invest, mainly because we have this relatively short term savings goal, and feel that S&S investments are more sensible in the longer term. As soon as we have purchased a house, we'll likely shift a large proportion of what we're currently overpaying into other types of investment.
    As for the pension, we've increased our contributions, but want to increase them a little further up to 15% of the gross salary (currently on 13%, including employer contributions).
    Ultimately, we would like to retire early, but are initially focused on this goal of buying a bigger, more flexible home. We're only 27/28 at the moment, so don't feel to bad about hitting this goal first before actively working on the really long-term plans.

    In terms of how we're managing large overpayments:
    1. We've been lucky enough to mostly avoid lifestyle inflation (i.e., with pay rises, we've increased the amount we were saving more than increasing our outgoings).
    2. We don't earn a crazy amount of money (works out as average UK salary each between the two of us), but we're both working full time which most definitely helps. Out of our income, we spend around half immediately (mortgage, bills, food, clothes, fun stuff, etc), and out of the other half, around 2/3 goes into mortgage overpayments, while 1/3 goes towards other savings goals. We do still go on holiday, with the aim being 1 big outside-of-Europe holiday + a smaller (European) trip each year.
    3. We use YNAB, a budgeting app, and have found a lot of ways to cut down our outgoings without impacting our lifestyle too severely. We go out for dinner 2-3 times a month, go to the pub a few times, take arts and sports classes, etc. We've definitely reduced our more impulsive spending though. I used to just buy stuff when I wanted it, just because we have enough money in the bank. Now, when I see a nice but expensive pair of shoes for example, I make a point of budgeting for it, saving up for it if need be, or perhaps even put it on my birthday/Christmas wish list. YNAB has caused a huge shift for that specifically, because every single £ is allocated.
    Original mortgage: December 2017, £203,495
    MFW start: April 2018, £201,800
    Current: £183,900
    • A Frayed Knot
    • By A Frayed Knot 7th Aug 18, 12:25 PM
    • 2,577 Posts
    • 11,357 Thanks
    A Frayed Knot
    • #4
    • 7th Aug 18, 12:25 PM
    • #4
    • 7th Aug 18, 12:25 PM
    I'm at the very low end of the scale - mortgage and salary wise. However you manage with what you have.

    I don't spend the way I used to (and I always saved - hence the 80% mortgage at the beginning) - but don't seem to be missing out on anything.

    I still save, go abroad on holidays (twice this year, so far) and won't give up my M&s Fresh Orange Juice , it's all about being more organised (batch cooking for instance, shopping at @ldi's or LIdl's) - you do have to work at it, finding the best deal for utilities, internet, insurances, etc - it all mounts up and my knotty noughts overpayments have kept me going when you hit the beginning/mid/end month slumps

    I did apply for my first ever 0% CC just for the "free" £30 , and boy, have I made that work, and some Could have done better, but as they say "better late, than never"

    Good Luck with your journey.
    Always have 00.00 at the end of your mortgage and one day it will all be 0's
    Target 12 months 12/24 (missing out no.13)
    MFMarch 30 Re/M Oct 23 Target -Dec 19
    O/P's 2014/£4000, 2015/£6294.69, 2016/£3186.80, 2017 £4068.97

    • Niv
    • By Niv 7th Aug 18, 12:30 PM
    • 1,704 Posts
    • 1,526 Thanks
    Niv
    • #5
    • 7th Aug 18, 12:30 PM
    • #5
    • 7th Aug 18, 12:30 PM
    Thanks guys, it is a useful insight.


    I have read numerous parts of numerous diaries - not claiming to have read every word etc, the majority of what I read has been around headline amounts and what has been cut back on. it is not always easy to find the sort of info i asked - i am sure it is there on some of them but some are very long and honestly, I get a bit bored reading tonnes of well done's (not be miserable but its just not my thing).


    I think I am in a similar position to you Julicorn, except I have just moved to my 'forever' home so now I am thinking about how best to pay down the mortgage. I am currently overpaying some, which in part is future proofing i.e if rates go up when my fixed deal ends my mortgage outgoing need not go up (the overpayment may reduce though!). I have a 12 month emergency fund so now I am starting to look into what sort of investment suits me best.
    YNWA

    Target: Mortgage free by 58.
    • Niv
    • By Niv 7th Aug 18, 12:35 PM
    • 1,704 Posts
    • 1,526 Thanks
    Niv
    • #6
    • 7th Aug 18, 12:35 PM
    • #6
    • 7th Aug 18, 12:35 PM
    Thanks Frayed. I think i was posting at the same time as you! Glad to know that even on a more modest budget you are able to have holidays! You do hear of those that more or less live on the bread line just to OP which I am glad to see you guys are not !


    I am trying to get my SO into thinking about food use better (batch cooking / using leftovers sensibly), it feels like a bit of an uphill struggle but overall we do have quite a low food wastage so am happy with that!
    YNWA

    Target: Mortgage free by 58.
    • sofarbehind
    • By sofarbehind 7th Aug 18, 5:21 PM
    • 296 Posts
    • 1,248 Thanks
    sofarbehind
    • #7
    • 7th Aug 18, 5:21 PM
    • #7
    • 7th Aug 18, 5:21 PM
    Interesting question and something I have been thinking over recently. I've just increased my OPs and will probably do so again next year to make them the same as the mortgage amount, I'm easing myself into bigger payments. I'm 15 months into my mortgage now.

    I haven't been away for over a year because that hasn't been a priority. I've saved an emergency fund and MSc fees, that seems more important. Next summer I will have a good holiday and I might have a couple of days in France this year. I think I spend less on stuff but I still eat out and go to concerts / theatre trips etc but don't go to very expensive places. I don't feel that I'm missing out and a couple of years without holidays don't matter to me. When I was younger I went on several expensive trips around Oz and Asia, they are some of the financial decisions I really regret actually. I was financially useless and badly paid in my 20s so I feel that I have some catching up to do. I have no other investments though I'm thinking about this now. My pension has also been a priority.
    Last edited by sofarbehind; 07-08-2018 at 5:29 PM.
    Save 12k in 2015, Number #052 (19.4k)
    Save 12k in 2016, Number #031 (15.1)
    Save 12k in 2018, £7500 / £10k target

    Mortgage overpayments 2018: £3516
    mortgage 2017 £145K, Oct 2018 £134.3k
    • Roxie
    • By Roxie 7th Aug 18, 7:11 PM
    • 574 Posts
    • 466 Thanks
    Roxie
    • #8
    • 7th Aug 18, 7:11 PM
    • #8
    • 7th Aug 18, 7:11 PM
    For us it's a priority so that we can retire before 67.

    Day to day we save where we can on supermarket BOGOFs, best deals on utilities etc. We don't buy any clothes, shoes, luxuries, treats at full price, these are always picked up in the sales. We tend to always take late deal breaks/weekends away rather than long holidays. Any savings we make on anything we try to put the 'saving' amount into the overpay pot. We are happy living quite simply, we aren't Spring chickens any longer so don't feel we are missing out on anything.

    We don't have high incomes but we just save hard where we can, any extra hours at work, the extra earned all goes into the overpayment pot. Any interest on savings goes into the overpayment pot, £2 coins are saved and at the end of the year they go into the overpayment pot.

    We do have some savings for a rainy day but for us, being mortgage free means enjoying an earlier retirement, so rather than save more we overpay where we can. Depending on what age we clear the mortgage means we work a further couple of years to build up the savings pot and with our modest private pensions we can escape the rat race.
    Last edited by Roxie; 07-08-2018 at 10:41 PM.
    MFW 2019 no: 33 £0/£5000
    MFW 2018 no: 78 £5000/£5000
    MFW 2017 no: 78 £3500/£3500
    • Urbanshyne
    • By Urbanshyne 11th Aug 18, 11:10 AM
    • 63 Posts
    • 275 Thanks
    Urbanshyne
    • #9
    • 11th Aug 18, 11:10 AM
    • #9
    • 11th Aug 18, 11:10 AM
    Hi Niv,

    It's a really interesting question. Essentially your asking how people prioritise and deploy the money they earn.

    In my case, I'm throwing everything I can at my mortgage which has meant that even a TV licence is out of the question. Holidays are a distant memory, buying anything new happened in some previous life, and Waitrose...oh how I miss Waitrose...doesn't enter my vocabulary anymore. I've pared things down to the bone and the pay off will be in 22 months time when £100,000 will (fingers crossed, touch wood) be cleared.

    This approach obviously isn't going to work for everyone and in many ways it's an irrational endeavour given how low the interest rate on my mortgage is. Investing the money over time in an index tracker for 25 years would probably return 4, maybe 5% over the 1.84% I'm currently paying on the debt. That gain would be considerable against the saving of debt interest I'm making by over paying. But, even knowing that, I'm still convinced that my overall well-being is better served by owning my home in the first instance.
    Neither a borrower or lender be; for loan oft loses both itself and friend.
    • greent
    • By greent 11th Aug 18, 10:14 PM
    • 7,600 Posts
    • 77,439 Thanks
    greent
    When we really started to target our personal mortgage my husband had been made redundant twice within a year. We had some savings (a decent amount) because of redundancy number 1 and some shares (from SAYE schemes) and had 4 children aged 12 to less than a year. However, 8 years down the line from then and he's had another total of just over 2 years without contracts at times - so savings were massively depleted. From a MH point of view, targeting the mtge above anything else was a priority. We also both had good final salary scheme pensions from old employers (old bank schemes)

    Now we're targeting the BTL, but in a slower way. We do go on holidays (the year after paying our residential mtge off we went to Florida in school summer hols for 3 weeks - it equated to the price of a new small car)but generally something like a week in Portugal in Oct half term.

    We're concentrating on BTL but also now looking at other investments now, as ideally we'd like to both be almost semi retired in 10 years (youngest will then hopefully be at uni) We've upped our current company pension contributions (employer 15%, we do 10%, but our salaries are small - we take quarterly dividends)and this year may also invest some more in personal pensions (husband has one from a previous employer and I could start one) and I've also opened a small S&S ISA (with a further monthly investment)

    We do have 1 child at uni, so that does cost us money as well and hopefully DS1 will be going next year. DS2 is currently 12 and DS3 9, so we still have quite a way to go with child costs (not complaining at all - our choice to have 4 children)

    I know I could have done it differently (and 'smarter') but our main priority was becoming MF. For us, it was the right move.
    I am the master of my fate; I am the captain of my soul
    Repaid mtge early (orig 11/25) 01/09 £124616 01/10 £104927 01/11 £89873 01/12 £76317 01/13 £52546 01/14 £35356 01/15 £12133 07/15 £NIL
    BTL Mtge 12/16 £69786. 2018 OPs (#18) £7575.92/£7500
    Net sales 2018 £751.22/£1000 PAYDOX18 (#15) Done £18918.90
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