To want to pay off our mortgage

@SparkleShineRainbow Start by changing from an interest only to repayment. I switched to interest only after a divorce 18 years ago. Just sold, my profit was £1400. I couldn't do it any other way. You can and should start a repayment. You definitely need some financial advice and take it.

This is a good point, interest rates have been so low for so long, that would have been the time to get the principle paid down. Now rates are higher it’s way more expensive in the base case.

im not sure the op is coming back, for some reason she thought people would think she was in a v privaleged position and most folks were on interest only. And has had a bit of a shock when she’s realised how deluded that was.

Some money? On the numbers she gave she needs around 400 grand, 😂

If you were sitting on a low interest rate you definitely should've overpaid the principal mortgage debt down, you could still do this to a maximum of 10% of the debt without incurring an ERC. You will never pay the mortgage off by just paying the interest, this is delusional. You have decided to squander any surplus cash for holidays etc and now you're worried about long term security. Over pay as much as you can as soon as you can, it's called making a sacrifice for the greater and longer good. Why your DH isn't on the same 'Repayment' page is equally bizarre.

Interest only mortgage is fine, you just need to put some money aside to repay the loan. As you say you've got some equity so that's good. Work out your timeline and put money aside into cash ISAs. Rates are good and it's better value than repayment mortgages currently.

We paid ours off by
Repayment, set to about 40% of income
Never adding to mortgage to pay for windows, kitchens (or indeed cars or holidays)
We were highly motivated though, having lost a house due to negative equity/having kids etc. Bought a 4 bed detached over 14years doing that.

@SparkleShineRainbow
Are you ok?
What are your thoughts? Are you making a plan?

My husband and I both owed property before we got together. We then moved up the property ladder, and bought and sold at good times and always buy houses that need work and sell them after doing them up and living there for a few years. We accumulated a fair amount of equity that way, especially in the last two houses so that when we sold our most recent home, we bought a slightly smaller wreck outright with enough money to do it up and remain mortgage free. I have to say, it's a nice feeling.

We started to move to a higher percentage of repayment over time and ended up 100% repayment. You can usually pay off up to 10% pa without penalty but obviously check.

To ask a really stupid question, exactly how did you think you would pay off the mortgage? I get it that you couldn't afford a standard repayment mortgage at the beginning, but surely you had thought about changing to that at some point? Otherwise, you either sell, pay off the mortgage and hope you have enough equity to purchase elsewhere, or you remortgage and take out a repayment mortgage.

My DH bought with a self-certified interest only mortgage in 2002. With no evidence of payment facility to cover the balance other than him stating "I have a plan in place to pay this off"

We then bought together with a salary related interest only mortgage in 2004 (again with no evidence of payment facility)

We ported that mortgage in 2007 and finally jumped to repayment in 2009 when the nursery fee days were coming to an end.

It was sensible for us at the time as the interest only mortgage was many multiples cheaper than rent and we benefited from some equity gain.

For various reasons we still have 20 years on our mortgage to pay off but have a plan, excellent LTV and no plans to upsize. We're staying put as long as we can.

I have have all kinds of mortgage over the last 40 years but the most common has been standard repayment mortgage over 25 years where you pay capital and interest back and are clear after 25 years. I paid off my last one (interest only) last year out of earnings by not spending all the money I earned. My children are adults now however so not at the same life stage of younger people who would not have that option due to high childcare bills and who aren't as old as I am so not earning as much etc.

Wow. So you've been living on what sounds like £150k plus for years and years and not actually paying off any of your mortgage? Just so you can go out loads and have nice holidays? I'm a bit stunned...
Unless you're willing to sell up and downsize at the end of your fixed-term mortgage, presuming you have enough equity, I would start throwing absolutely everything you have every month at paying off this mortgage.

People pay off their mortgage by erm, repaying them. You haven't been doing that as you've been paying interest only. Thats why you have a lot of disposable income. What about pensions? Have you been paying into one of them?

Yes it is more than paying rent, but this isn’t the op can’t afford it. They can. They just chose to not to, instead choosing to splurge on fun things instead. So yes it is highly stupid. And maintaining a huge debt so you can enjoy the money is ludicrous.

when the mortgage ends, she will need to mortgage again. And keep paying rhe interest as she doesn’t have 400 grand to pay it back. And she needs to keep doing it till retirement and then give them their pension to pay it off.

amyone who thinks this is a good idea needs to give their head a wobble.

edited to add , I did the numbers based on 25 years, in the ops case unless she comes up with a repayment plan, she will be paying it for at least a decade longer. So to the tune of another 150k, taking the costs of a 400k house to close to a million. It is batshit.

This is a really common problem in London, where lots of people took out interest only mortgages as the only way to avoid renting with a family. Yes, you’re effectively renting from the mortgage lender, but you benefit from the uplift in value and don’t have to deal with the ruthless rental market.

Be aware of how 25-30 year mortgage options dry up once you hit 45-50.

If you want to remain in your current home, suggest you get mortgage advice to move to a repayment mortgage asap, now you don’t have childcare costs. Unless you owe a lot of money, it should be manageable given your high income, though you may need to cut back on spending. Things like regular bought coffees etc can obvs add up to a lot annually.

If you value your spending/lifestyle more (and we never know what life may throw at us later, so not unreasonable to enjoy life/make memories as a family while the kids are younger) then perhaps consider moving to a cheaper neighbourhood. Once kids are teenagers, they’re more independent getting around on public transport, so can travel further to school/see friends.

True that they’ll pay a lot of interest but likely the overall cost is less than they would have paid in rent for a similar period and more secure than renting and they can afford to pay that rent on a bigger or better located property vs repayment and they have more spending money now that they can enjoy at this point in their lives and they will still get the benefit of an equity gain. Downside is they carry some risks vs repayment and they’ll lose some possible options for later in life as they would never fully own that home. I don’t think it’s a stupid thing though, to choose to want to enjoy more of your money now. You don’t know what might happen in 5/10/20 years time at all. I’ve had far too many colleagues & friends die in their 50s to think it’s stupid to prefer to have as much of your money to enjoy while you are young & well & can do things you might not be able to manage later in life.

Endowment mortgages were definitely a big thing and even 110% mortgages at one point. The extra money paid for moving costs/furniture etc

Well they were. I bought my first house for £26k in 1997.

most mortgage were for 25 years back then. You either did capital repayment or interest only with an endowment policy.

I agree she can fix this, I assume she’s in her forties, but we can’t forget she’s paying hundreds of thousands more on interest, on the mid level example I gave it was 166k more. 550 a month extra every month for the privalge of not paying rhe principle sum.

so any increase will need to be offset by how much they’ve spent on interest to enable it. And she still owes as much as they day she bought it.

so in the example I gave with a repayment mortgage she’d have paid 634k in total, inc interest for a 400k house. In interest only it is 800k. Assuming she has the 400k to pay back, which she doesn’t, likely without raiding her own pension.

so any value increase is only above the 800, otherwise she’s either broken even or lost money.

but it is fixable, she needs to pay off anything she can now, without penalty and then move to a repayment mortgage,

@SparkleShineRainbow these replies have probably got you panicking. Don’t worry, you are on a high salary and your mortgage doesn’t sound to be that large. You can save this!

Lots of good advice here I won’t repeat. Definitely speak to a mortgage broker in real life though.

It’s true that the path you went down with your mortgage wasn’t the most financially sound. But what’s done is done and you put some of the extra disposable money you had into renovations, so you will have boosted your property value there.

I paid mine off aged 46 by downsizing when DC left home and using the equity from the sale to purchase another house with cash.

Buying a house twice the size of the one they have is also an option since having an interest only mortgage has no connection to how much money they have or how much they can afford to pay each month.

An interest only mortgage for the super rich has no connection to affordability or why normal people take out interest only mortgages

Not to pay their mortgage. They are wealthy, they don’t need to downsize to pay it off as you wrote.

Downsizing is an option obviously which some may choose to do