If you are mortgage free, where does your income go?

[Presentxx]

We will be in this position soon and I’m intrigued as to how others spend/utilise their income when the biggest debt has been cleared? Hope this isn’t too invasive, but its not something I find myself comfortable asking those closest to me.

I'd be interested in knowing how people are mortgage-free.

I'm 36 and will be mortgage free as of next month. Dh a few years older but bought property (cheap in a shit area) when he was young (20) as he worked straight from school and didn't go to uni (he did later). The house we live in now is his 4th (my 2nd). We live in an expensive area in the SE and have sold our house and moving to my much cheaper but buzzy hometown. Bought a house half the price (and nicer all round) in a better area. I still can't believe it.

I put the money to a car using the rental scheme (forgotten how it's referred to)

I invest and buy more property. I'm in the process now of buying an apartment building

And in answer to the question about becoming mortgage-free relatively early, a lot is due to good fortune.

We went to university before tuition fees were introduced. My husband was a sponsored student, so had no student loan for maintenance at the end of it.

We both have relatively well paid jobs (but not the 6 figure salaries often mentioned on MN), and because we couldn’t conceive until late, I was already well established and quite senior by the time our baby came along. We also therefore didn’t have to fund a period of maternity leave and childcare costs when our salaries were lower.

We were also lucky enough to get on the property ladder before it became unaffordable, and benefited from low interest rates on the mortgage.

The one thing that we did have control over is that we have always lived well within our means. Neither of us are bothered about having new things or indicators of status, so our outgoings are quite a lot lower than most of our contemporaries.

So in a lot of ways, we have completely lucked out in life. However, given the choice between being mortgage-free and childless at 40, and having to pay the mortgage off over its full term and being able to have more than one child, I would choose the latter in a heartbeat. So I guess there are swings and roundabouts.

We are making very large overpayments to be mortgage-free in a few years so it will make a huge difference to our bank account when it happens! We have a high family income but have maintained a fairly average/normal lifestyle which is enabling us to make the overpayments. I think most close family and friends think we are on a fraction of the income we are on. We do want to continue with our normal life though so it suits us But a couple of nice holidays a year would be lovely and being able to take my parents or treat them in other ways would be lovely.

To the question how, choosing a smaller house that a lot of my friends, running a 10 year old car only, relatively frugal holidays (mainly for environmental reasons).

If you overpay on the mortgage you save a huge amount of money, everything spare went in there.

I live a life well within my means but work bloody hard.

We hope to be mortgage free next year. At the moment our disposable income is pretty low so prob will be able to have a few more treats like eating out etc, but will be putting some aside eaxh month to save for DC if they go to uni, and probably save for a holiday abroad.

We aren’t there yet, but our plan is pension savings. Never underestimate just how expensive retirement will be.

I agree being mortgage free does not mean you are automatically loaded, especially if you live on your own. Obviously there are the usual bills to pay, but nearly every month there is an extra bill to pay so it is difficult to save at all some months.
I try to live carefully and put money away for retirement which is several years away. I will have a small teachers pension and a much smaller personal pension.
I am tired of living frugally so I can save to have enough to live on when I reach state pension age.

Good points from Secnarf. We also bought before we had children as did my daughter, as did my parents (who put babies off for TEN years so they could have their two professional salaries in the 1950s and buy a house before I arrived) and indeed my father's father was 49 when he was born as he also put off marrying until older so he could afford it!

"Buy before you breed" is a good slogan to try to pass on to your children if they choose areas or careers which enable them to buy and if they want to buy.

Just to expand a bit on my earlier post, we had a lot of equity in our second house because we put 25% down/deposit and took out a 15 year fixed rate mortgage on the rest. So a lot of that mortgage principle was paid off in the seven years we were there. We also sold in a sellers market and had substantial price appreciation.

As other posters have said, mortgage interest is a killer. Shorten the term and/or make additional principle payments. You'll have much more to trade up with later.

@JamSarnie

We diverted it all into our pensions and savings.

Rather than reduce my working hours I want to retire early. I am hoping to retire at 55.

Have you seen the recent announcement about pension age increasing to 57?

Paid it off last year (I sold my first house which we'd been letting out. We kept it in case things didn't work out when we got together - 20 years later...)

The extra money we have now is going on buying my husband a couple of years off his retirement age and investing in savings for our retirement (and any university help the DDs might neeed). I'm also starting up an online selling business related to a long-term hobby of mine. It's growing slowly (want to keep it manageable so I can work around school runs for at least the next 7 years) and reinvesting any profits in stock and equipment for at least the next 6 months. I can afford to take this opportunity because there's one less large bill each month.

I'd be interested in knowing how people are mortgage-free
I'm hoping to be mortgage free in next 18 months but I am older than a lot of the people on this thread (early 50's) which obviously makes a big difference added to : through 30's & 40's spent absolute minimum on cars / clothes / beauty products etc and ploughed into mortgage instead

I hope you don't mind me asking a question on this thread OP. Once mortgage paid off I would really like to try and improve my retirement fund. I've got an okish work pension but won't be enough to live on and we are no longer allowed to make additional contributions on top of the standard ones. A few people have mentioned additional pension payments on this threads - are you doing that in private pensions ? Thanks !

Have you seen the recent announcement about pension age increasing to 57?

I have savings outside of pensions to account for the government meddling with the private pension dates. I suspect they may try and raise it further to 60.

I hope you don't mind me asking a question on this thread OP. Once mortgage paid off I would really like to try and improve my retirement fund. I've got an okish work pension but won't be enough to live on and we are no longer allowed to make additional contributions on top of the standard ones. A few people have mentioned additional pension payments on this threads - are you doing that in private pensions ? Thanks !

I have my work place one and have opened another private pension which I contribute extra to. That one is managed by an IFA.

No idea, we never seem to have spare cash.

We paid off our mortgage about 16 years ago, and bought a holiday home about 10 years ago which is also mortgage free but we never seem to have much left at the end of the month.

I am a SATM and DH pays extra into his pension but 2 cars, 2 houses and 3 kids take most of his wages. I guess you could describe us as property rich cash poor.

I had to stop working due to ill health at the same time that my mortgage ended so our income went down rather than up.

Another point re being mortgage free is that it usually means you've owned your home for many years. People forget that home ownership comes with the costs of maintenance, renovations, repairs, etc. Maybe not in the short term, so minimal if you buy and sell within a few years, but once you've been in a home for 20 years or more, it can become a money pit - new kitchen and bathroom, redecoration (in and out), boiler replacement, and the biggie, the new roof. We've spent more on repairs and maintenance over the 20 years we've had our house than it's purchase price, and that doesn't include any improvements such as extensions, conversions etc. It looks the same as it did 20 years ago, but now will last another 10-20 years before we have to do it all again.

Thanks @jamsarnie

Dh took early retirement once the mortgage was gone and ds through uni. The spare money for the couple of months prior to this was spent on the move back to UK, storage, and getting things done in the house before we moved back.

We paid our mortgage off using a real mixture of things. Firstly no matter how much you over pay, do it as soon as possible as much as possible.

It took me two years to get DH fully on board and because we had a mortgage that let you transfer any over payments no matter how small up to 10% of the value of the debt, I made a lot of small overpayments.

I saved got money of coupon for something so I would transfer that amount, sometimes 50p sometimes £10, birthday money, money I made from online surveys or from eBay it all went to the mortgage. When we remortgaged the broker looked confused going through our balance until I explained what I had done, there was £3500 in small crazy payments and when he said it was genius and had saved years off the mortgage. DH got on board there and then and when we set the new mortgage payment and £100 more than was needed and continued making adhoc payments and when we remortgaged we could pay off a chunk as well. Just keep chipping away, we did live a very frugal lifestyle for a long time and those habits take a long time to go.

As to what we do now with it, renovation on a new but mortgage free house. I have never spent more than £3k on a car and I have never wanted anything flash, we do travel when we can and we have a cat which is looked after like royalty.

We have charitable donations and I don’t worry about a food budget, but we don’t spend a fortune, maybe £80 a week for two plus cat food. With no kids the rest goes in savings although no sure what for tbh.

@WhyIsItSoHardToPickAUsername sorry, I wasn't clear - I meant that we were both graduates. Less common in the 90s at least for people of our background - I think maybe 15% of 18 year olds went to uni back then - so we had well paid jobs. But you're right, we'd both have been about 5 years working (& saving for deposit)

My point really was that these days even with a degree level job houses became relatively much more expensive soon afterwards.

I've been mortgage free for the last 3 years, it enables me to have a few nicer luxuries in life, I am saving hard towards my pension and if everything goes to plan I should be able to retire in 3 years at the age of 50

Bought a yacht and retrained as a cat behavioural consultant.