To want to pay off our mortgage

[SparkleShineRainbow]

If you have paid off your mortgage without a cash injection from family / inheritance / lottery, how did you do it?
Would you recommend it?

Live with DH and the 2 DC, both in secondary school, in London. Been in our house 10-15 years on interest only, lots of equity due to value increase. I have a good job, salary in low 6 figures, no reliable annual bonus although some years it’s a decent 4-figure sum. Husband self employed, earns a bit above UK national average.
We enjoy a good standard of living, holidays and kids activities etc. We spend most of what we earn. I save about 10% but only started recently. Not been brought up with money. Disposable spending money has been more important until now. But I don’t want to work forever and I don’t have a plan. I now want to pay mortgage so I feel more secure long term eg if I lose job or want to cut down.

Mortgage principal is a bit over 3x combined annual income (after tax).
We have never and will never receive cash injection from family or inheritance. I sometimes play the lottery though!

We are v privileged, I recognise that and apologise to those struggling who might find the question a bit grotesque.
NC in case outing.

Without selling I don’t know how you could- and there will be fees if you pay it off early.

Could you keep saving- maybe increase this amount- take out critical illness life insurance, and make a plan for the longer term when your kids have left home and it might be feasible to downsize?

Do you really have an interest only mortgage? They are unusual these days. Surely switching to a repayment would enable you to start paying off the principal - it doesn’t sound like a huge mortgage? Or move somewhere you can afford with the equity built up and you’ll be mortgage free.

YANBU to want to pay it off, but YABVU to pay interest only and waste all your money instead of investing it or making it work for you, but better late than never, I suppose.

I haven't paid mine off but we are on track to pay it off in the next 10 years. We have almost always overpaid the mortgage, and at least half of my bonus went towards the mortgage each year. During covid times it was the full lot as we weren't going anywhere or doing anything anyway.

1. In a city of 9 million people this post is not outing.
2. If you're paying interest only, you are sitting on a ticking time bomb unless you are ultimately prepared to downsize and purchase out of equity.

"Not been brought up with money. Disposable spending money has been more important until now."

This is your answer. You can earn whatever you like, but if you don't prioritise paying off debt, you leave yourself very exposed and you will never be wealthy. It's a question of priority.

You and DH need to be on the same page too. Good luck.

What was the plan for paying it off when it was interest only? When we were interest only we had an endowment. When we switched to repayment we overpaid as much as we possibly could, but also kept up the endowment. When it matured it wouldn’t have paid off the original loan, but it did pay off what we then owed, plus a nice healthy little nest egg.

Why have you only been paying the interest for 15 years? Your problem is that you have been underpaying for 15 years!

The vast majority of those who repay their mortgage will do so by repaying the principal amount every month.

Back of fag packet calculation: Assuming your income is ~ £140k (£8k a month after tax inc. both salaries?) then the mortgage must be £420k. You could do it in 15 years at ~£3.3k a month?

Pay it off. Then immediately set up a savings plan for the amount you have been paying in interest plus half of what the repayment would have been.

Not having a mortgage gives you a lot of choices.

Interst only is fine if you have a repayment plan, but there is a reason they went out of favour.

Interest only? You’re a long way from paying your mortgage off, that’s a terrible idea to be interest only, you need to change that asap to start repaying your capital sum, you should only ever me interest only if you simply can’t pay back on a standard mortgage, ie it’s desperate and for as a short a period as possible. Or you 100 percent know you will have the lump sum to pay it off.

paying the mortgage off is putting down the last payment, owing nothing. You’re not putting a penny to pay your debt.

what you’re doing is like a credit card, where you pay the interest and never pay what you borrowed.

Went interest only when we bought the place as finances were very constrained at that point with 2 small DC and mat leave for the main earner. Then there were renovations, etc. Should have gone repayment at last renewal but we jumped on a good deal when rates were about to rise. Been concerned about the longer term plan ever since.
Thanks for the answers so far.

We're mortgage free (in a cheap part of the country) mainly due to interest rates falling between the point we agreed the tracker mortgage and moving in. At one point we were on 0.15% interest!!! We continued the agreed mortgage repayments, and so massively overpaid.
That's obviously not going to happen for you. I'd say you need to be saving significantly more than 10% into a product with high returns, in order to have the capital available to pay off the mortgage. How are you currently planning on paying off the loan? Alternatively, you could switch to a repayment mortgage. Basically, you need to find d a way to have the value of the loan available in ?10? years time when the interest only mortgage ends.

Then you’d have got a good deal for a standard mortgage paying back the money owed.

to answer your question people pay the mortgage off over years. And they pay back some of the capital sum every month.

im shocked you have interest only for so long.

You realize that when you get to the end of your mortgage term you will have to pay the full amount of the mortgage right? So say you bought your house 15 years ago and took out a 25 year mortgage, in 10 years you will be expected to pay the full amount of whatever you borrowed.

I suggest you speak to a mortgage broker and get a repayment mortgage. See if you can get a new mortgage for say 20 years repayment to pay it off. If you can afford it, try and pay it in 10/15 years. The amount you pay each month will depend on how much you borrowed. It's something you need to do asap as the longer you leave it the less time you have left to pay it off. You may have a nice lifestyle now, but that's because you only pay the interest . When you switch to repayment you're going to have to tighten your belts.

The only other alternative is to sell up, pay off the mortgage and move somewhere cheaper which whatever equity you have left.

We're aiming to pay ours off in 3yrs at the end of our fix. Our mortgage interest rate is incredibly low at the moment (0.99% ) and not worth actually paying it off. We are filling up ISAs at better rates and should have enough to have it repaid 18yrs early.

We have 7 years left on our fix then will pay off the last 30k with savings. How did we do it is an odd question though - it's capital and interest repayment so it's paying itself.

If you have been paying interest-only and not investing what you'd have been paying off the capital you have been badly advised.

We have been in our house as long as you but with a repayment mortgage, and we make small monthly overpayments on our standing order. So we can see the repayment term reducing but aren't going to get penalised. It cuts the interest cost too. At the minute we are still in repayment but we've taken five years off the term and I'd like to take at least another five years off before it's repaid.
In your shoes I'd look on money saving expert and talk to a decent broker (MSE probably has a recommendation) about switching to a repayment mortgage. Then you can start thinking about overpayments once you are repaying.
Dave Ramsey is another useful resource but he's in the Bible Belt of the US so you do need to take some of his material with a pinch of salt. Some of it is very helpful though if you look past what annoys you!

No early repayment fees if you pay off when your fixed rate is expired. You sell and buy outside London to be mortgage free when the time is right (kids out of school etx). And yes - switch to repayment or at least overpay regularly

It's so odd being on 6 figures plus bonus and only paying interest, unless you'd been investing your money elsewhere to build a lump sum to pay off the principal. But from the talk of disposable income that doesn't seem to be the case. My ILs did interest only and were in trouble when the mortgage term ended and they hadn't planned for it. So yes, it's more than time to start paying it off properly one way or another. Unless you're planning to move somewhere way cheaper that the leftover equity will buy outright, then you need to start making a dent in the mortgage asap.

Speak to a broker and move to a repayment plan. You may find you need to extend your term, but worth it to be paying down the capital.

If you're locked into a deal for now, find out how much extra a month you can pay without penalty and pay that, or as close to as you can.

Interest only for 10-15 years is an unusual decision these days. I think you probably need to prepare for a fall in living standards if you're spending all your money. You've essentially been living beyond your means if the aim is to ultimately own your house.

How are your pensions?

We over paid which helped !

If your on interest only, surely you haven’t paid a penny on mortgage yet? You have basically been renting the house for 15 years, and will have to return it to the bank when mortgage is up if you have no way of paying it

switch now to a repayment

We took out a 20 year. Have paid off around half. Haven’t overpaid yet due to various things. Job change, interest increase, baby, cost of living. But it’s already a fairly high monthly amount for us as we took 20 instead of 25/30 year one out as far better rates.
We should be Mortgage free before 50.

How long have you got left on your current mortgage deal? Sounds like you have a roughly £400,000 mortgage and currently save around £16k a year? That will take you 25 years to pay it off not taking into account interest on the mortgage. Most people pay off mortgages gradually over the 25-30 years of the mortgage term,and make overpayments. You have been paying interest only so are starting this mid way through your mortgage term. You’ll need to save a lot more than 10% of your income if you want to pay it off early, and switch to a repayment mortgage as soon as possible.

Your mortgage lender may allow you to overpay by 10% per year. So you could start doing that until your next renewal where you could then switch repayment.

Most people pay off their mortgage gradually via a repayment mortgage.

It’s strange to me that you have opted for an interest only mortgage when renewing as there has been a lot of negative publicity about them.

You need to start paying off capital if you can now afford to do so. Most Lenders allow you to make overpayments although it may only be 10% of the outstanding mortgage amount per year without incurring financial penalties.

I would phone your Lender and ask what is the biggest lump sum you could pay off each year and take it from there. It’s a good idea to get this mortgage paid off now while you are earning good money.

Op we pay ours off at the start of November. As in put a small lump sum down and it is done, not a penny owing, the current deal ends at the end of Oct. We have had the mortgage for a decade, two deals, we have been massively over paying and now have a small lump sum to pay off, which we had saved. I earn similar to yourself,my husband also earns,mortgage multiplier was the same, about 3 times.

the financial illiteracy associated with your question is concerning. People pay their mortgages off by paying a repayment mortgage and reducing the capital sum every month, and often overpaying at the end of each year of the deal, and then a small lump sum to close it, or they come into money like inheritance, but that just often pays off what’s left, they still do repayment mortgages.

interest only mortgages are not something most people would consider. Not unless they had to and for a short period as the interest payments always remain high as the capital sum never reduces. Or they have a cast iron way to repay the full amount in a short period.

you need to move to a repayment mortgage asap, and you both need to start to save, as no savings and a large mortgage is far from a privaleged position. It’s a risky one, and storing up a miserable old age.