To want to pay off our mortgage

To answer your questions…first house aged 25 (a barely liveable dump) with a £30k deposit we had saved against £160k property in 2003. No kids to begin with, 3 by the time we finished. Each property was a dive in a rubbish part of town which we then saved and did up to a reasonable standard-managed to reduced mortgage by doing this each time. As I said, not here to brag or try and pass it off as easy but OP asked how if/it was possible so posting only to offer one perspective on how it might be acheivable. BTW I do find the avocado toast remark a bit distasteful given you literally have no idea of how challenging a background DH and I came from - avocados and iPhones absolutely did not feature anywhere in our upbringings or lifestyles…

Sorry but I think that's a bit 'sacrifice avocado toast and iPhones then you can buy a house'!
In 2024 a starter flat is out of reach for many young and not so young people. You didn't say what age you got on the housing ladder and if you were in a couple and bought together, presumably no children or caring responsibilities and in good health with reasonable education standard but you had decent schools near you growing up? And what your first purchase deposit & sale price compared to your combined salaries back in the day when you bought?
Cos those things matter a lot.
I'm brushing over the moving abroad to earn decent money tax-free as if that's an available option to the majority of people wanting to get on the housing ladder in 2024 because that's probably less usual to most people than an inheritance which the op is being scorned about thinking that's how people pay off mortgages.

Did u get the wrong financial adviser, interest only mortgages haven’t been promoted since the companies dropped all the incentives for selling them so over 20 years.
lots of interest only mortgages have large penalties for making higher repayments, might be better to remortgage to a repayment over less years.

But the OP is demonstrating what happens when that financial intelligence is less than 100% present. This isn't a few years sorting things out, it's closer to fifteen and still no plan.

The reason that the flexibility is being regulated away is that too many people took the piss and have banked on appreciation (or a lucky lightning strike) as the escape route.

We had a mortgage that didn’t penalise you for paying extra…. So we paid a minimum of £50 extra a month…. If we could afford to we paid more. Then DH got a job abroad and was earning (for us) mega money….(by mumsnet standards pennies) … anyway we paid off huge chunks every year and cleared the mortgage completely on my 40th birthday! Definitely worth while as you end up paying pack triple what you borrow if you do it over the full term. We saved ourselves a packet

NRFT but came from v poor upbringing, no help from either side, fairly modest incomes but managed to payoff before we were 40 by a combination of moving frequently from fixer upper to fixer upper on edges of up and coming locations, living overseas to gain a tax free savings buffer and moving to somewhere a bit less chic and overpaying regularly. Now in a lovely location with large home and (prob too big) gardens. Not a stealth brag, but if you are prepared to undergo a lot of pain for ultimate long term gain it is doing to start with nothing and make it happen.

We have a repayment mortgage and consistently pay 10% additional on top of the monthly payments, this will knock off in total around 8 years depending on interest rates. If we can afford to pay a chunk off at the end of term we will but savings are currently earmarked for things like new windows etc

You can repay whatever you want at any time on an interest only mortgage. Even if you had have been paying £250 a month over the interest, after 10-15 years that would have been ~£50k.

I would immediately start paying £100/month extra, and then start seeing how you can increase that at every opportunity. Make it a game for yourself or something. Until now, you've used up every bit of extra income on whatever, now you need to put every bit of extra income into your mortgage.

I think it is possible to save a lot each month if you sit down and go through every transaction and find the cheapest amount for things like Gas and electricity, home and car insurance, etc
Food and clothes shopping, days out/holidays eating out and buying random shit are other things you can cut down on.

Selling stuff on eBay or FBMP, renting out your driveway/parking space, having Airbnb guests 1 nights per week or even just taking on an extra job are all things that can go towards paying the mortgage.

The ability to take out an interest-only mortgage without demonstrating a solid plan to pay it off was a bonkers decision by lenders

TBH I think this is the problem we have with mortgages and the restrictive measures that mortgage companies have in place to save us from our selves

We are talking about taking out a 25 year interest only mortgage. The fact that someone might not have any plans to live in that house for 25 years and might just want a few years of lesser payments whilst they establish themselves in a career or get dc through nursery or launch their own business on the side of their f/t job or want to save for an emergency fund or just want to have less outgoings whilst they are going through other shit in their lives

It doesn’t mean the house will be repossessed after 25 years and the mortgage company will make someone homeless and penniless and lose money.

There has to be some expectation of financial intelligence that if you want to stay in the property you need to put in place a plan to pay back the outstanding mortgage

Whether that is by investing money elsewhere or when ever you get a lump sum either by redundancy or inheritance or lottery win you pay back as much as you can. Or you save up and pay back a set amount over several years or you sell up and buy somewhere cheaper with the equity or take out a mortgage on a new property.

Not allowing this flexibility is what makes things so much harder.

Mortgage Advisor here, you can switch to repayment (capital & interest) or even part repayment, at any time without affecting your rate. You just need to call your lender and ask them to do so.

I didn’t think it was implausible. I’m fully aware people can save this amount. Simply 400k is not classified by most people as some money, using your words ,and for most people 3.5 grand a month would be an awful lot of money. Especially for someone who lives as the op does and with their earnings.

as said though, I don’t think she’s coming back.as she really did think she was very privileged and everyone did this. Which is a level of delusion seldom seen. To have wasted all those years of low interest rates and to be paying hundreds of thousands more for her mortgage is crazy, and she even says they “jumped” at the last interest free deal when they should have run for cover.

We have a mortgage where we pay off the capital. Every few months I’ll pay a little bit more off as an extra payment. £300 here and there. On a couple of occasions when she has had a good bonus we have paid an extra £10k. Always tell them I want it paid to the capital not to lower our usual payments.
it really has made a difference in the amount we still have to pay. Chip away little and often - check how much over you can pay each month or year.

Oh, I agree with you; I hope she's better at her job than she is at personal finance.

I was replying to a PP who thought £400k was implausible to achieve with ISAs.

If there is money avaible to save enough to pay off the capital sum, unless you are very disciplined or are in some sort of complex high net worth situation where it pays to keep a lot of flexibility in your finances, it seems foolish to me to save the money elsewhere and only pay the interest on your mortgage.

Just use that money to pay down the capital, you pay less interest in the long run and you have the security of knowing you are actually paying the mortgage off and you own more and more of your property. That second one is very important to me but I am pretty risk adverse when it comes to financial issues.

Yes we did it. My husband is a builder and took on a huge contract when we were early 30’s. It was scary as hell because we had trade accounts bumped up to the maximum at one point before the payments came in. We only had a small mortgage (around 50k) due to buying very young, renovating and then selling with a good profit. So once we’d paid the trade accounts we paid of our mortgage. That was 20 years ago now. We’ve never moved or taken another mortgage just extended this house as our family grew. It’s been nice having no mortgage and not worrying when interest rates are all over the place.

You make that sound so trivially easy. But it assumes they can find the discipline to take £3,350/month off their current spending habits every month for 10 years. This is someone living in fantasy land that assumes people pay off mortgages from windfalls. I'd love to know what job pays a low-six-figure salary for candidates with such a loose grip on life's realities.

To be fair, if each of them takes out an ISA @ £20k pa, in 10 years they'd have £400k and that's not counting interest and all tax free. OP alone earns a 6 figure salary plus a good bonus.

A stocks and shares ISA would be better than cash though.

If you have kids in secondary school and live in London, and not very very high incomes, then your best shot at being mortgage-free will probably be to downsize and buy something smaller with little or no mortgage after your kids finish secondary smaller.

Meanwhile, if you are a very low-interest rate deal for the moment, instead of paying it down early you may want to consider instead putting money into savings earn a higher rate, and then used the accumulated amount to reduce your mortgage principal when the deal ends. If you can earn more than the mortgage interest rate, then the only real disadvantage is if you lack the self discipline to keep the money saved. One way to help with that and also to increase your net interest income on savings might be to open a cash ISA, so the interest will be tax free, possibly even with a fixed term ending around the time when your mortgage ends.
“Low interest deal” relative to the current interest rate environment would have to be below around 3.5%-4.0%. If you are paying 4%,5% or more on your mortgage, then you might be better off just starting to make some overpayments on your mortgage.

These are just ideas, not advice, since we don’t even know each other. And the big picture is probably still that unless you can massively cut your expenses, the first paragraph carries the main point.

DD is single now with a young child and on quite low earnings. She has had a fixed rate mortgage for about 9 years with low interest rates. Fortunately she has saved up as much as she could and each year has been able to pay off I think up to 10% in line with the terms of her mortgage. Now that her fixed mortgage has run off and the variable rate/another fixed rate is much higher she is in the fortunate position of now having a very small mortgage outstanding. Had she not done this she might have struggled with the new higher rates.

How did we do it? We spent less than we earned each month & used the balance to pay down the mortgage principal so we weren't spending our lives feathering the nests of bankers paying interest, while having nowhere to live in old age 🤷🏼‍♀️ There are convenient products available to spread the maths across, say, a 25 year period-called "repayment mortgages".

Being less flippant though, if the London market takes say a 20% dive over the next 10 years, keep in mind that at present all of that value will come out of your current 'equity' and you'll still owe the bank the same amount back. Would you be able to buy anywhere you'd want to live if that happened?

You've obviously become entirely too used to having more cash sloshing around than you actually have in your 'real world' family budget - particularly once nursery fees dropped away. Even if you'd put just half of one child's nursery fees towards overpaying the mortgage each month, you'd be most of the way through it by now.

Or put another way - one holiday a year & two bottles of wine plus 3 coffees a week.

I get that in London it must be very easy to be drawn into keeping up with the Joneses & having the children in the right activities, holidaying in the right places, eating out at nice venues etc etc etc.

But the kind of sums you seem to be talking about would have been absolutely transformed by knocking £600 a month off the principal for the last 8-15 years.

You've lost a lot of time, but you can still get there relatively quickly if you address your household budget and find a grand a month to stash (best done now before uni fees loom!) Make sure bonuses all go straight into paying down the principal too.

As your husband is self-employed, it may be worth looking at an offset mortgage-any money he saves monthly towards his twice a year tax payments can be sat offsetting the total interest you pay and then drawn down on tax day. Make sure this is OVER a general 15/20 year repayment plan though, rather than borrowing from the mortgage to pay them.

It sounds like a fundamental household budget rethink will be required, but you've been living on borrowed time, so you might as well crack on with it now - better late than never!

We overpaid ours over the years to pay it off early. Sometimes we managed an extra grand, sometimes we could only afford £50 a month - which is a couple of takeaways. It really hacked away at the loan and brought down the interest each year too.

At the moment you're essentially renting (although you have gained equity). However, it means the bank owns a large percentage of your house. You need to think ahead and try to find a way to pay if off.

don’t worry. soon you start the better. most mortgages allow you to overpay. start by paying extra £300 a month and make whatever cuts you have to even if you aren’t saving anything. at the moment you are merely renting your house.
id leave 3 months salary in savings if yiy have it and overpay a lump sum of yiy have anything.
listen you have options you have a lot of equity but if you get made redundant or long term sick you will be in trouble. so just start overpaying on payday.
and literally don’t worry you could all die tomorrow life is for living too. xx

Simply, if you can't earn more with your capital, then its best to pay off more of the mortgage.

Any fees, or other costs need to be factored in clearly. Plus you always should have a contingency reserve.

The Budget at the end of the month will likely influence your decision.

If family are willing to offer financial help to pay it off why not? You’ll then have the equity in your house which you can use if and when you decide to move with either no or a small mortgage. I had a lot of money left to me by my nan when she died and I used £20k of it to pay off mine and my husbands debts and my car finance. Just check your terms and conditions that theres no early repayment charge for paying it off early and if there is just hang on paying it off until it doesn’t apply