Is this doable in 5 years?

[Tinadreamer]

Hi

Me and dh have both just turned 45. We are both frazzled in our jobs, worn out and both agree that we need a plan.

We have decided that we want to pay off all of our remaining mortgage and debt by the time we are 50, so that we can reevaluate our lives and start to enjoy life a bit more.

I have been number crunching all morning and basically in order to achieve this in 5 years, we need to pay off an additional £900 per months across the mortgage and debts. Here are our current numbers -

Mortgage - £894
Household bills and all direct debits excluding debt - £724
Food - £400 ( 2 teenagers)
Car lease - £297 ( we won't renew this)
Credit cards - £240 ( slight overpayment)
HSBC loan - £138
TOTAL - £2693

So between us we take home £4433. Paying the extra £900 would get us totally mortgage and debt free in 5 years ( December 2027) however it would mean that our monthly surplus/disposable income would be £840. This is essentially the money that we use for holidays, Christmas, kids stuff etc etc.

We are both keen to take the challenge, but do you think that we are setting ourselves up to fail?

Perhaps a better way of looking at it is where does your “spare” money go currently?

It sounds doable to me but I'm pretty frugal, young mum with mortgage and 2 kids in the 70s so I didn't have much choice and it sort of stuck.

A good place to look is MoneSavingExpert, if you go on there and give a full statement of your outgoings and income they will give you advice. There are some really good people on there.

Good luck, I hope you do it.

you need MSE mortgage free wannabe.

it is possible to make a massive dent in five years

Of course you wouldn’t fail - that’s a huge amount still left - £840?!!

It’s matter of priorities and only you know what those are. £840 a month will soon go if you want a £4K summer holiday for the family. But if paying off your mortgage is more important to you, then it’s fine.

The handy thing is, you can’t actually go wrong. You don’t “fail” as such - but adjust. Next month, pay £840 off your highest interest debt. Watch your spending for the rest of the month. If it was do-able, yay! That’s £840 you’re not paying interest on now. If it was really tight for you, reduce it next month.

It’s better to just start, than dither about what you can do!

Sorry, £900 is the debt payment and £840 the spare. But - still the same point! Don’t dither - JFDI!!!

Can I recommend getting YNAB app? That will track every penny of your £840 to make sure it's where you need it. We have a high monthly income like you and found we're really guilty of just chucking it around but when it's broken down into every little thing it's easy to say do I want to allocate that £50 to random shit from Amazon or into my overpayment pot??

But my other thought was to think about the time you have 'left' with your kids at home / on holidays / spending time with you. Depends exactly how old they are and what they're like but I wouldn't want to sacrifice any joy in the "last" 5 years with them for the sake of being financially independent just in time for them to leave home.

Looks doable to me, have you shown DH the figures? If you can both stick to the budget then it will work.

How old are your teenagers now?

We took home nearly the same amount as you when we overpaid our mortgage and paid it all off within 7 years. Our mortgage monthly payment was about 780-ish and we overpaid about 17 k every year. I followed my overpayment plan strictly. There's a free calculator that allows me to simulate the effect of different payment. To be honest, it was really hard. In a way, it was similar to dieting, constantly resisting the urge to eat and fighting the reluctance to exercise. So, it is possible to achieve it. But just be prepared to take control and be strict about everything.
FYI, we are in our early 40's and it is a great feeling to be mortgage free, especially in current financial turbulence.

Wouldn't you be better paying off the loan and credit cards as the interest might be less?

Having £840 a month surplus/disposable is not a challange, it’s luxury. lol

I'd agree with this. You don't want life to be miserable either.

I think if your dc have been used to a good standard of living they might struggle with the new regime, or even end up resentful. I don't know if that'd be worth it to finish the mortgage a bit early.

what does this mean for your pensions?

pension contributions are almost always better than paying down mortgage.

in five years time you don’t necessarily quit work completely but go part time to still cover mortgage and have pension growing

Paying off your debts first would be my priority, whilst still having some money for your teenagers.

Have a look at threads on MN and MSE called FIRE Financial Independence Retire Early.

Use the money to pay of the debt with the highest interest.

Do you have any savings? If not consider paying £600 off debts and save £300. Review each quarter and use 1/2 the savings to pay off more debt.

Look at current accounts that pay interest on you balance to use as a second account for household DD. Pay a set amount in each month to allow for annual bills such as insurance. The balance will fluctuate but is earning some interest.

What is the interest rate on the mortgage, credit cards and loans? You’d be better off paying the higher rate ones first. Mortgage may be less clear cut. Paying more into pensions instead could pay off in the longer-term.

Throw the £840 at the loan and credit card. Then once it’s paid use the £400 to overpay mortgage?

Aldo car lease? How long to go? What the balloon payment? Is it better to end it walk away and use £4x900 plus 4 months of the £300 to buy outright?

I assume £300 a month is a swanky car. I drive a car that cost £8k second hand and am quite happy with it 6 years into my ownership.

Sounds doable but wretched to be honest.
You say you are both frazzled so not only will you continue to be frazzled but you will be miserable and money focussed for the next 5 years.

We could have upped our payments, cleared the remainder of our mortgage in the last few years but we want a life. So we are booking holidays and travel and family life instead.
Still paying off mortgage at a good rate, not long left on it BUT the thought of pouring spare cash into the bank rather than into life just stops me in my tracks.
I waited so long for my kids to come along, I want to be in gorgeous places with them, seeing them happy, laughing, content, eating great food, seeing the world.

Plus, dear god, what if you make your final mortgage payment then drop down dead. I’d be FURIOUS.
Anything… ANYTHING could happen to any of you next week.
Being frazzled and money focused is just not appealing.

Of course it is. You just have to budget everything and stick to it. We are saving for a deposit and our weekly spends are 100 a week for food ,100 for weekend spending/gifts and 30 each week for children things. That's it all we give ourselves for a family of 5.

I mean really if you want to do It and are serious about it you'll try any way and that's better than not.

Where did your debt come from?

Do you really only spend £400 a month on food with 2 teenagers?

I think you need to first track your spending religiously (I’d second YNAB) and only then decide on the overpayment plan.

Hmmm
I'm trying to figure out what's best for dh and I to do too.
Very fortunately got a new fixed rate deal @1.2% for 5 years earlier this year.
That'll be up Summer 2027 when we will be 55.
Ideally, we'd like to pay the balance off then which - assuming no overpayment - will be £55k.

We can do a few things:

1. Keep saving and use that to pay it off
2. Overpayment each month plus above
3. Dh take tax free 25% lump sum to pay it off at 55 plus savings
4. For the next 5 years pay off £10k in overpayment per year

Wwyd?

At the moment you can get way more than 1.2% on savings so I'd save and get the interest, if interest rates drop lower than 1.2% then pay the savings off the mortgage.

I took the lump sum when I retired, I regret it now and wish I hadn't.

Thanks