AIBU to ask your opinion on my mortgage

[rachb2019]

Essentially I took out a mortgage on my first house in 2017 - the terms were the right decision at the time - but now that circumstances have changed I really regret my decision.

I paid £190k for my house in 2017 and borrowed £130k on a five year fix, over 25 years.

However, I am almost 100% certain by the time I need to re-negotiate the mortgage in 2022 I will have lost my job (we have been taken over and it is going through the competition laws as we speak).

I now have savings that could have covered most of the £130k back in 2017, which is why I regret borrowing so much money over such a long period of time.

My gut feeling is that I want to get the mortgage paid off as much as I can so I have freedom to leave the company I work for - but I guess I will be hammered with penalties for clearing the mortgage early.

If okay to ask, I was wondering what would you do?

[Monty27]

There'll be a facility to over pay. Don't panic! Get free financial advice. There's so.many options.
Take heart. And you WILL get another job

[Biscusting]

You’ll need to check the terms of your mortgage agreement if you still have the paperwork handy. Most mortgages allow you to overpay by 10% per year with no penalty. Many now offer no fee or restrictions on paying it off.

Why are you worrying about being unemployed in 2022?

[hauntedvagina]

Am I reading this right? You have enough money to clear your mortgage?

If so, just overpay the maximum you can until the end of your fixed term and then if you want to, clear the balance which should be without any penalty.

I'm sure the job market will look very different in 2022 to how it does now.

[ICouldHaveCheckedFirst]

The Ts and Cs will tell you, and if you have had an annual statement, read it carefully. If there's a penalty for early pay-off it should be spelt out clearly. Used to be common to limit you to paying off up to 10% of remaining capital value without penalty.

If you are still not sure, you can call and your mortgage provider will explain the options to you, eg extending the term. Just make sure you understand what it will cost you before you make any change.

[Merryoldgoat]

If you have a big amount of savings what are you worrying for? Can’t you just wait until the end of the period and then pay it off if you have the money?

[BlueLadybird]

So do you mean you have cash in the bank to pay off the mortgage? If so the redemption penalty may not be huge, it’s worth asking and you can often overpay a percentage each year without penalty. And in 2 years when the fixed rate is up the redemption penalty should reduce significantly so you could pay it off then if you like.

It’s always worth having some money in savings though.

Hope you are able to secure another job soon.

[snowybean]

You can normally overpay by up to 10% of the balance every year for your fixed term, and as SOON as the fixed term ends you can pay off the rest of the mortgage in one go, with no penalties.

That's what I'm going to do. Two years is plenty to get yourself another job, you'll be fine :)

[PlanDeRaccordement]

It’s easy. You don’t get early payment penalty if you sell your house and pay it off that way. So sell your house, roll the equity and your savings on to another house with a better mortgage loan.

[hammeringinmyhead]

It depends. Check your statement. On my first mortgage I think the penalty for paying off early during the 5 year fixed rate was about 5k, but that was only maybe 12 months worth of the "interest" portion of the payments. I'd speak to a mortgage advisor.

I can't really comment on the job bit. Surely your job loss, if you know about it now, will not happen exactly when you remortgage? Could you not have found something else by then and be a year into it?

[ComtesseDeSpair]

This has to be a stealth boast, right? “I’ve saved enough money to pay off my entire mortgage because I’m awesome, and being in the position to be able to do that must mean I do something which requires decent brains and thinking for work, but I’m still going to post about being worried about it.”

I’m case you are actually genuine, when your fix runs out, your lender will contact you a couple of months ahead and invite you to remortgage, at which point you can tell them your intention is to pay the balance off.

[SunnySummerDays]

Agree with all the above. Ring your lender. Ask how much you can pay off in 2020. And again in 2021 and 2022. Even the fix ends you would usually be penalty free. Consider what interest rate you are Paying V what you can earn on savings. If the mortgage is higher pay it off.

[rachb2019]

Thanks everyone.

Essentially I have most of the cash in the bank now and feel an idiot for borrowing so much in 2017.

I am almost certain to lose my job in the next couple of years due to a takeover of our company (it's going through the competition law checks) and would like to get the mortgage paid off as quickly as possible, but balanced against the fact there will be penalties.

[YinuCeatleAyru]

check the Ts&Cs but the 5 year fix mortgages I looked at had 0

[MotherMorph]

In the fixed term mortgages weve had, the penalty for paying early gets smaller the further into the term you go. Eg if you pay off early the first year of a 5 year fixed term, you might pay a 5% penalty, if you pay off in year 4 it might be 2%....

[PickAChew]

Safest thing to do is overpay as much as you dare, hold on to the rest of your savings until you're sure about your job. When you know what the scenario is, then you will have a better idea of whether it's safest to stay on the tracker rate you'll probably be moved to, overpaying from savings, shift the kit, from savings, or negotiate a new mortgage, if that would offer a more favorable rate, at that time.

[JuanitaJuanita]

This has to be a stealth boast, right? “I’ve saved enough money to pay off my entire mortgage because I’m awesome, and being in the position to be able to do that must mean I do something which requires decent brains and thinking for work, but I’m still going to post about being worried about it.”

Yah! And if you're so worried that you'll lose your job "in a couple of years" pre empt it and start looking for another one now

[SillyCow6]

Can you not just ask them what the penalty would be to pay it all off, either now or in 2022 and decide then what you'll do? I dont think paying it off early costs too much in penalties so if you have your job for the next 12+ months and you can continue to save to help towards any penalty fees and money to live on for a few months if you do lose your job (which wont be much if you have your mortgage paid off). If youve saved 130k in the last 3 years Im sure you can save a reasonable amount between now and 2022

Best of luck OP. I think you're in a great position!

[randolph78]

What will the penalties actually be? Your mortgage conditions should spell that out.

[YinuCeatleAyru]

oops sorry fumbled...
had 4% penalty in y1&2 but that dropped to 2% and 1% in later years.

don't fear the penalty too much. compare the penalty with the interest you will pay if you don't pay off early - it may not cost that much...

[LonnyVonnyWilsonFrickett]

Overpay as much as you can within your current agreement
Make sure your savings are working as hard as they possibly can for you
Look for another job if job security is important to you
Make sure you haven't got any other debts
And then forget about it. What you did a couple of years ago suited you a couple of years ago, it's great though deffo a bit stealthyboasty that you're in a better position now but unless you've saved enough for a time machine, it can't be changed now.

[Vonnie44]

The penalty usually works out at the total amount of interest you would have paid during the fixed term. In your case this is 5 years. Each year the penalty will go down. You could pay all the mortgage of now and pay the penalty which would work out as the same as paying the interest up to the end of the 5 year term and the full balance.

[SailingAwayIntoSunrise]

As pp have said, overpay as much as you're allowed as per your your t&c's.

Are you worried that having so much money in savings you won't be entitled to government help if you do lose your job?

Personally I'm worried about the banks, so I'd pay it off if the penalty isn't too outrageous.

[letmethinkaboutitfornow]

Something smells fishy with this OP!
You don’t sound genuine. 🤔🤔

[Nancydrawn]

You should also compare the penalty for paying off early to the amount you'd save in interest. My guess is that it'll be close to a wash.

Imagining you have 20 years and 110k on your mortgage, you'll be paying somewhere in the realm of 35k in interest over those years (even at a super low rate of 3%). Run the numbers through a calculator.

Normally I'd say keep the mortgage as you'll probably make a higher percentage in an investment than you would paying such low interest fees, but if you think you'll have to pull the money to cover your job, it might make sense to pull it for this.

Also, if you know redundancy's coming in 2-3 years, you should have a good chunk of time to look for a job, so this may all be moot.

[SunnySummerDays]

Ask for an interest forecast as a . How much interest will I be charged from today until 2022, assuming normal payments made. B. What is the penalty for early repayment now ( or choose a date , end of year etc)