How to be mortgage free!?

[Whydoireadthis]

Hiya, I was wondering if there’s anybody out there who is mortgage free from overlying their mortgage, who’s done so with children/part time work and a household income of about £40k? I keep reading about it and it interests me but the only stories I come across are of household incomes of about £100k+!! My mortgage is around £700 per month and suppose I’d like some real life experiences and some bigger money saving tips then just ‘cancel unused direct debits’ and ‘taking packed lunches’ because I think I live frugally on most things anyway.
Any tips appreciated 😊
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You can download a spreadsheet here:

www.scribd.com/doc/294640994/Mortgage-Amortization-Sheet-Mortgage-Overpayment-Comparison

You can input your own mortgage account details and see for your self!

Good luck

Hi OP, I'd recommend taking a look at Mr money mustache. He's a more extreme version of money saving expert. His focus is on retiring early, which is a lot easier in the US because they have a hack to access their pensions early. Anyway, there's some good advice on how to shift your lifestyle in order to earn more, save more and spend less. For example, he states that the easiest way to increase your income is to ask for a raise, the second easiest is to get a new job They have a UK section on his forum. I found his website in my twenties, and it's massively influenced my financial planning and life.

I'd also second playing around with an overpayment calculator. We overpay by £160ish a month, which has taken 5 years off its term. I like ningaj's advice, but I would just do this via overpayment, as then you have more flexibility if your income goes down.

Further, I would prioritise a pension over your mortgage if money is tight, you get tax relief and generally the pension pot will have a higher interest rate than a fixed rate mortgage. We aren't going crazy with our pensions though, as we have a long time to go until we can access them.

also be careful. part of the chat regarding re-paying mortgages early was for the generation that took out a loan when interest rates were much higher. .... thats actually one of the things that has allowed those in their 40s and above to pay off large chunks of their mortgage. overpaying if you loan is small but interest rates are high makes sense....however, you actually chip away a lot less if it's a high debt/low interest. it might actually be more valuable to pay more into a pension.

First build up an emergency find of 3-6 months bills, then prioritise your pension, then, after this, overpay the mortgage.

We're far from mortgage free but one thing we've done is keep our mortgage repayments the same even when our repayments came down. We bought 7 years ago and payments were £1700pcm. Value has gone up and we threw a few bonuses at it, so LTV ratio went in our favour and interest rate came way down. Repayments currently at £1150pcm but we still pay £1700. It's comfortable for us to do so and it's absolutely incredible how quickly the loan amount drops when you overpay.

I'll be mortgage free at 49. I overpaid, saved, was left by my h got 60% of the house, met someone in the same position and between us we only needed a 3 year loan (he had less equity). Don't recommend this method though

I have the same goal and a lower income than you. I have shed 10 years off my mortgage by overpaying by 150 month for most of the last decade. I just renewed and agreed to overpay by a bit more and in the end my mortgage will be 17 years instead of 30. It can be done.

The way I've always viewed it is every 150 or so is something like a week off the mortgage. By doing that, as often as I can, then I feel like I can see that's one less week, two, three, four etc. Psychologically that means a lot to me.

The only time I don't think it's a good idea is if you don't have a good emergency fund. I really think that means 6-9 months expenses saved. Covid has really showed that the sh*t can hit the fan for longer than we think and it will probably take years for the economy to improve after this. After that, then it's every cent you can off the mortgage.

RIght now with lower interest rates you can really tackle the principle off your mortgage which means every pound you put down really makes a difference. Look at Mortgage Overpayment Calculator on Money Saving Expert and plug in some numbers. It's a great motivator and really helps you see how finding 200-300 extra a month to put down makes a difference. Good Luck!

Given how low mortgage rates are currently, and probably for the foreseeable future, you may well be better off getting extra money in a pension early and keeping the mortgage at normal levels. Pensions aren't so predictable, but may well make more sense.

We're mortgage free (or at least we will be next week) thanks to DP buying a few Bitcoin when they cost £3 grand in March and they're now worth £25k. Could have left it as I'm sure they'll go higher. But we struggled so much in the second half of 2020 for unforeseen reasons that it seemed right for us to take the pressure off, sell two of them and pay the house off.

Start small even £10 a month helps.

As a pp said if your interest rate goes down keep repayments at the previous level.

If you are lucky enough to get an annual pay rise and/or a promotion increase your monthly payment by 50% of the increase in take home pay. For example if you get a pay rise of £600 a year that is £50 a month so increase payments by £25. If you did that every year in 5 years time you would be overpaying £125.00 a month = £1,500 a year. You don't miss the money as you never had it and you still get a small increase in take home pay.

We have a spreadsheet and depending on what I get paid per month depends on what additional we pay, but in addition to this we have £100 DD in place,but if I have had a busy month at work and done more hours I will chuck the rest on the mortgage, after I’ve taken out my set wage. We have an aim to be mortgage free by time we are 50 which would knock 11 years off. We put 1k from a 7k inheritance onto the mortgage, my husband is deciding what to do with the rest of the 6k, he wants to mourn his nana first before making the decision but he said most likely another 2k will go on the mortgage as well. In the last year we have taken 19months off the term. One month I didn’t overpay we my washing machine broke and mortgage overpayment covered that.
We didn’t realise about overpayments being an option when we took out our first mortgage, otherwise we would have a long time ago and prob be in a very different position.
I have a spreadsheet so we don’t overpay the 10% within the year but so far never even got close.
My brother has a DD or £15 a month overpaying his mortgage. Better than nothing.

We currently overpay our mortgage by £500 per month. This should halve the term on it (but only if we keep it up for another 12 years!). I doubt we'll be able to do that and it will be the first thing to go if things get desperate.

I'm about to start paying off the odd pounds and pence too. So if for example (not real figures) the balance was £123,412.34 I'd pay an extra £2.34 into the mortgage (maybe £12.34) to bring it to a "round" number.

I'm going to do that monthly. It will help a little. I'm obsessed with paying off the mortgage early (lived with insecure housing as a teenager) but my DH is more relaxed. I'd live an ultra frugal life to throw every penny I could at the mortgage but he wants some fun and nice things so balances me out.

I recently got him to agree to the £500 overpayment and I've shown him all the calculators. I hope we can keep it up for ages but so many variables.

Only other way we'd do it is to win alarmed lump sum of money.

@Covine

Rent.

👌

Well thats a silly and unhelpful answer.

This is about 15 years ago but we made some investments that paid off our mortgage. They were quite high risk and as with any investments you can also lose the entire amount. DH Lost 25k on one fateful afternoon.

Obviously all those things can be tweaked, but apparently the most efficient way to do it while interest rates for savings are low. You'll 'save' more paying off your mortgage than any amount of saving

Not necessarily. I'm still comfortably beating my mortgage rate with savings as the mortgage rate is under 0.5% Check your rate before rushing to overpay.

OP, in your case it sounds like you need to up your income and/or be very frugal. Have a look at the moneysavingexpert money make over and get the weekly email for lots of ways to increase your income, even by small and irregular amounts (cashback when shopping, money for changing bank accounts, etc, sell on ebay etc) and cutting your bills (get the lowest TV/broadband package you can stand and always negotiate on price, that sort of thing). Vow to throw all the extra money and savings towards your mortgage, rather than see it as extra spending money. You'll get there, but the stories of people who have paid off big mortgages decades earlier with bonuses, don't fit most people's circumstances.

You could look at other money generating ideas

Rent out a room in your property
Rent out your parking space
Rent out your loft space for storage
I've read some people go out to work & rent out their kitchen or living space to someone who works from home
However, possibly not so easy in these Covid times

www.mumsnet.com/Talk/legal_money_matters/4123153-jan-2021-earn-10-day-thread-it-s-2021-let-s-earn-some
The above thread is really helpful and lots of us on there make a few hundred a month extra which you could put towards your mortgage.

I'm not sure if the fact that my dad died fairly young clouds my view on all this. Yes we could all overpay (if poss), get rid of mortgages early, then start saving for the pension …. but none of us know if we are going to live to retirement/old age.

Surely it's a balance - some nice treats here and there, weekends away, holidays. meals out (pre covid obv!). I don't mean being completely reckless or frivolous but just nice memories, particularly if you have children.

What do you do for a living OP?? Everyone I know who is mortgage free (including myself) managed to do it in our late 20's early 30's by going abroad to work for 2-5 years! Would this be an option. A lot of contracts paid our rent, flights etc and all earnings were tax free. If you are a nurse, teacher or engineer I would recommend (some even did it with a child in tow)

We paid ours off a few years ago by overpaying but we are both high earners and other than going on holiday and school fees, we really don't spend much. If you're eating out once a fortnight for example then that's a fair bit to instead use for overpayments. If you already live frugally though you need another income stream. There's no magic solution

Household income 40k, young children and teenagers and a monthly mortgage payment of over £800 and we will be mortgage free in 3 years when I will be early 40’s.
We haven’t been able to overpay as such but whenever we moved to a new mortgage deal we took a year off the outstanding mortgage term and struggled through. We haven't had much fun money but that will come in a few years.

Theres a few ways.
It depends on how strict you want to be.
The first would be to buy a cheaper house. A smaller mortgage would be paid quicker.
The second would be to ensure you had saved a huge deposit before buying so you get a better deal on your mortgage.
Third overpay every month. No matter how little put it to your mortgage.
Fourth be as frugal as you can. And put the money saved to your mortgage.
Fifth- increase your income and put the extra towards your mortgage.

We did it by about 40. That was with one part-timer and 2 workers who wouldn’t be higher rate tax payers even if full time.

The key is to look at both outgoings and incomings. You need to take a holistic response to your finances. Ideally this begins with and includes choosing the property you live in and therefore the mortgage so that the size of the mortgage itself and the mo they payments can allow some overpayments. Clearly, if you massively stretch yourself with your mortgage, it’s always going to be much harder to overpay.

We live in an average 3 bed semi. Lots of our friends lived in similar houses but then upgraded. They moved on and substantially upped 5eir mortgages. We stayed put. In the end, their asset will be worth more than ours, but we will have had about 15 years mortgage free, which enables us to choose independent education and to retire in early 50s. They will have a bigger house and use state education and will work longer. Neither is right...just different choices. Financial planning from an early stage simply gives you more choices.

If you can’t up your income, and your largest outgoing is the mortgage, and you’re not prepared to downsize house so the mortgage reduces, then you should be able to manage some overpayments, but they probably won’t be vast.

Be money savvy and ensure yous witch bills regularly and avoid spending where you don’t need to, essentially reduce the outgoings. And at the same time you need to boost the money coming in. Interest rates are low now, but doing 5 switches of bank account as a couple per year should get you £500 when the bank switch bribes return. Check you’ve claimed for working from home on your tax code. Consider if you could work a bit more...are compressed hours possible?

It’s not just about the mortgage though...it’s about your whole financial perspective. For most people, by the time they think about think, they’ve already bought a house and determined their career path....so the financial options open are the smaller ones not the bigger ones. But for people who are younger or who haven’t bought yet, some of those early choices can make being mortgage free by 40s much more likely. That said, house prices generally make buying anything more difficult these days so it may well be that only the highest earners get mortgage free early in the future.

@scubadub

What do you do for a living OP?? Everyone I know who is mortgage free (including myself) managed to do it in our late 20's early 30's by going abroad to work for 2-5 years! Would this be an option. A lot of contracts paid our rent, flights etc and all earnings were tax free. If you are a nurse, teacher or engineer I would recommend (some even did it with a child in tow)

These are great, I just do a bit of admin in an office but it’s pretty dead-end. I’ve stayed there because they’re good to me with holidays, time off to do ‘life admin’ and I genuinely do like my colleagues. I had a baby last year so I’m currently on maternity leave, which was another reason I’ve stayed out for now- I needed to make sure I qualified for maternity pay. We live in a small house and don’t really have plans to move for another 5 years at least. We overpay the mortgage by about £200 a month and have managed to do this over covid and maternity which I’m pleased with. Will take all these tips on board. Like @BigSandyBalls2015 said, memories are important so I’m already looking at things to do with children that don’t cost the Earth. Another thing I’ve been meaning to look at is my pension. I’ve no idea what I have but there’s a financial advisor in the family that I’m going to spend some time with. Really grateful for all the tips and experiences. Thank you!

If you’re overpaying by £200 per month, you are doing well.

If you’re considering moving in 5 years, consider if you need to do this. Moving usually means higher house price and higher mortgage...being mortgage feee will be further away. Of course, lots of people do need to move because of growing family etc. Just look into it carefully and don’t assume it’s the next step automatically. It doesn’t have to be. And the smaller your mortgage, the more likely it is you’ll be free of it sooner.

It’s all about balancing things and working out your priorities. Some people would rather pay the mortgage for another 10 years and retire 10 years later than live in a smaller house or go without certain holidays or cars or other lifestyle choices. Others put a high value in early retirement or being mortgage free and aren’t bothered about bugger houses or cars anyway. Most people find some kind of happy medium. Seeing the bigger picture and longer term consequences of choices, especially the bigger ones such as whether to move to a bigger house is key, rather than just looking at individual choices in isolation.