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.

Very true, but perhaps they didn't have the spare cash to save anything until now.

If two kids in secondary are thinking uni - they may well be looking at more expenses not less in upcoming years - and yes kids can work etc or they may not be thinking that at all -

https://www.moneysavingexpert.com/students/student-loan-parental-contribution-tool/

It is an expense parents in England are expected to help cover. They may find their costs rise not fall in next few years - and they still need to be thinking about covering the house cost at some point.

If you can't afford the interest-only mortgage and the investment plan to pay it off, then you can't afford the property in the first place and you're living beyond your means.

No wonder the property market is borked.

Unless they’re is a repayment vehicle.

if the OP took our their mortgage after 2008, it will have been assessed for affordability and after the crash, there’s strict criteria on interest only.

If the OP had a repayment vehicle they wouldn't be making this post.

Agree in principle, but it rather sounds like they could afford to, they just chose to prioritise a lavish lifestyle. Being able to pay off the mortgage will require a big shift in attitude for sure.

If you move to repayment affordability will be reassesed, even if you stay with the same lender because it’s a material change in the contract. But given your salaries are high, and you purchased the property a while ago, I imagine you’ll be fine. Your payments will definitely be higher than you’re used to though

interest only is a perfectly reasonable option, if you’ve got a plan. Most BTL and commercial mortgages are done on an interest only basis but that’s to retain liquidity.

did OP say when they took their mortgage out?

it will have needed to be secured against something? Especially post regulation and post crash

The strict affordability checks that came into force in 2014 were scrapped by the BoE in 2022, largely because of the number of people who go trapped into not being able to re-mortgage onto cheaper loans - which was patently absurd.

It does mean though that people have been able to get deals they can't really afford again, though. OP I'm guessing remortgaged after the rules were relaxed.

10-15 years ago, according to the first post.

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

Yes. I did in the same way every single person I know has done it. I don't know anyone who has family money or who inherited. We took a repayment mortgage and paid it every month for 25 years until it was finally paid off.

You don't actually own any of your house by the sound of it. You've just paid the interest for 15 years so in another decade you'll still owe whatever you bought it for, which is truly bizarre. It's like renting somewhere...

The OP has specifically said there is no repayment vehicle.

She appears to think most people just rely on inheritance / gifts from family to pay off their mortgage rather than just paying off part of the capital sum each month. She wants to know the super secret method used by people to pay off their mortgage when they don’t have family help.

The people who are clever financially and who have self control who therefore have an interest only mortgage plus a repayment vehicle after carefully considering interest rates etc. don’t have an issue. People like the OP who have effectively based their whole lifestyle on borrowed money most definitely do.

If she’s lucky, house prices will have risen sufficiently that they have enough equity in the house to keep a roof over their heads. Unfortunately they are likely to need to downgrade significantly either in location or size.

Used my redundancy money. Best thing I ever did. Recommend it without hesitation.

I suspect financial incontinence is a significant factor.

I sold my business. The proceeds were added to the money from the sale of our previous house and we bought our house outright.

Not necessarily fees. Or if there are, it would most likely be less than if they continued with it and paid all the interest.

We paid ours off 2 years ago and the 'fee' was £400, but it saved us more than 4 times that in interest.

We’re about to pay off our interest only mortgage which we’ve had for 22 years. We did it in a combination of -
-Making repayments every month, so you know it’s happening.
-Making one large one off payment by taking some money out of our pensions (this is a very tax efficient way of doing it if you have a good pension scheme.)
Moving house, our dc have left home and we don’t need the space so are moving.

I must admit Interest Only has been very good for us, we run our own business so we’ve able to be very flexible with payments over the years.

Reasons not to pay off a mortgage:

You are getting a higher rate on your savings than your mortgage interest rate.
You want a savings buffer of disposable income.

On the basis you are just splurging all your money, and don't appear to have either of the above, remortgage with a repayment mortgage with the option to overpay as soon as possible. It should be paid off before you retire.

Unless you have a really good pension, you should also be saving money in equities, NS&I or an ISA.

We paid off a repayment mortgage five years ago, although we later moved to a bigger house so we aren't mortgage free now. We have a high joint income with annual bonus, and had lowish outgoings for most of that time (before we had dcs!) so it was just a matter of extra overpayments. We had a mortgage which allowed unlimited overpayments so we'd let funds build up for a while, then make an overpayment every few months.

In hindsight it wasn't the best thing to do financially as the interest rates were far lower back then, and we could have got more making extra pension contributions. But it allowed us to have a large deposit on our next house so it has worked out fine. We've decided not to overpay so much on our current mortgage, after crunching the numbers it makes more sense to invest in equities instead, and let the mortgage run its usual term.

We over paid in dribs and drabs but then an investment did well so paid off in full. No early redemption fees. DH Uncle had an interest only mortgage and messed up. He ended up getting planning permission for the end of his garden, sold his main house and lived in a caravan while a smaller house was built on the plot, he now lives in it.

You “do it” by spending a lot less, and paying off a lot more!

She appears to think most people just rely on inheritance / gifts from family to pay off their mortgage rather than just paying off part of the capital sum each month. She wants to know the super secret method used by people to pay off their mortgage when they don’t have family help

I was also surprised by this, she appears to think interest only is the norm. And folks have some secret to paying the mortgage off.

there are 12.5 million mortgages in the uk, of which approximately 5 percent are interest only in 23 and that’s due to fall by the end of 24 by nearly 30 percent., 97 percent of people will have a repayment mortgage by the end of this year.

people who take interest only do so mainly for buy to let, or due to not being able to afford repayment, or due to being financially savvy, with strong investments and paying off lump sums annually.

there will be very few people like the op who chose to just splurge the money and then wonder how folks pay it off. Which is mind boggling.

She apologises for coming across as privileged.

I don't think "privileged" is the word most of us are thinking of.

Thing is it’s really hard to get an interest only mortgage now. You need to prove you can pay it back,

op did you promise to chuck your pension at it? 😱

Not really, with inflation and wages rises men the original debt has shrunk and the monthly mortgage interest bill is likely to be WAY lower than renting the equivalent, plus the security verses renting is not comparable.

But most people do have other investments to pay off the debt at some point if they choose an interest mortgage.

My mate has one, she chose to live in a bigger house and put her child through private school rather than pay down the mortgage. Hasn't really got a plan to pay it off, but also happy to downsize/move abroad when the children leave home if that's what's required.

Much depends on how old the OP is. Her children are in secondary school. If she's in her late 40s then it was incredibly common to have an interest only mortgage when we first started out on the property ladder. I'm 49 - I bought my first house at 23 when you could buy a house for £25k. I've only ever had interest only mortgages. Initially people used to get them with an endowment policy but that doesn't happen nowadays. It then became quite common to overpay. Interest rates then crashed and so capital repayment mortgages became a lot more affordable so there was no need really to look at interest only and they became far less common.

The issue of whether she's financially competent is a different one. If she is in her late 40s with no repayment vehicle at all and no plan for paying off her mortgage then it seems like she will probably need to sell her house and downsize at the point at which the mortgage term is due to end (which seems potentially possible if she has a large amount of equity) or remortage on a capital repayment basis (which will only be possible if she can demonstrate she can meet the repayments so looks unlikely on the basis of their current set up) or do something to earn more money.

OP you need as a mater of urgency to look at your outgoings and start paying off your massive debt.