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.

How do I pay off my mortgage? I pay down a portion of the capital every month. HTH.

The answer is to reduce your spending and over pay. You have to choose what to prioritise. If you do a budget you’ll probably be horrified what you spend, then do another calculation to see how much interest you’d save if you over pay.

How old are you OP? It's not the 90s any more you need to get off the interest only mortgage. The only way you'll pay it off is to start actually paying it off, or to sell and buy something much cheaper which would likely be away from London. There's no way else around it really. The good thing is if you bought 15+ years ago hopefully it was relatively low compared to today's prices and you'll have enough equity for a 60% LTV rate?

I'd look at remortgaging

Honestly, we just made significant overpayments on a regular basis to get it paid off, but that was doable as we hadn't overstretched ourselves.

How did you originally plan to pay it off when you decided to go interest only?

Move to a repayment mortgage and start overpaying. Also start a regular investment account.

We overpay since DD left expensive nursery, all amounts saved when she started school went to a regular investment account and mortgage overpayment.

The money goes out when my salary comes in, so there is no real sense of not having the money.

I would get an independent financial advisor to sort through your finances, it's worth the initial payment to them to really get a good idea what you need and what you can afford.

I grew up without money and for me a sizeable savings account is very important. We earn a good net income and don't look too much on prices but saving money comes first to me.

What are the terms of your mortgage.

I use to be able to pay an additional 10% a year so repaid a little extra each month and then lump summed once a year.

If you can’t do the above, I would open a specific long term savings account for the remainder of your mortgage. You can then pay off a lump sum and move to a repayment mortgage.

would you consider seeing a financial advisor?

I'm not a financial adviser and perhaps you should see one. But my gut reaction would be to re-mortgage onto a repayment mortgage as a first step - I assume that will be a big step up in repayment terms so get used to that. I'd then look at your pension and then, long term, plan to move out of London and release some of that equity. The advantage of the London housing market is that the equity can often buy a decent house somewhere else.

Consult a financial adviser rather than MN.

OMG I can't believe some of the answers here having a go at you for having an interest only mortgage. Right now, I wish I'd done the same!

Check if your mortgage allows you to pay any capital off. It may not, so save alongside it until any deal you have is drawing to an end. When you remortgage, use your savings to reduce the mortgage amount. Your savings should be at least equivalent to the number of years your deal is as a fraction of the total years left in the mortgage. Eg 5 year deal, 25 year mortgage = 5/25 or 1/5 of mortgage value.

Paying off your mortgage may not be the most financially advantageous thing to do with your savings though. So as an alternative, use your savings to invest in another property, tenant or Airbnb it and save the profit. The property will accrue in value and your income will cover the mortgage plus profit. Do it via a LTD company as that is more tax efficient. Or invest in an ISA (stocks and shares but relatively safe ones)
Lastly, engage a financiaadvices to help you plan for the future, use one that can access the whole market. They are in the best place to review your circumstances and advise you on what is best for your long term financial security, not a load of MN commentators, albeit some may be FAs.

Good luck!

If you are on an interest only mortgage and didn’t set up a savings plan for repayment I think you may have a case for mis-selling against your mortgage broker.

Yeah what was the original plan

This is shocking advice. Which I’m sorry should have been guessed when it starts off you also wish you’d done the same.

I think you need to know what they told the mortgage provider before you can say that. And interest only mortgages are so very known to be a major issue that gets people to basically lose their homes when they don’t have the money to pay the capital sum then it’s absolutely guaranteed they said something. This will not have been offered up.

@Dibbydoos OMG I can't believe some of the answers here having a go at you for having an interest only mortgage. Right now, I wish I'd done the same!

Why? It’s not the 90s anymore. It’s insane to take out an interest only mortgage 15 years ago with absolutely no thought as to how to repay.
Your post is completely irrelevant to OPs situation, she isn’t making riskier but higher earning decisions with her money, she isn’t saving! She hasn’t saved for 15 years and has only started to save 10% of her income, not even joint which is likely to be nowhere enough of a monthly contribution to the mortgage.
OP took an interest free mortgage at a time the pitfalls were well advertised and lived a nice life, going on holidays and not being financially strapped as she mentions in her OP but spending every penny and making no plan for how to actually repay her mortgage.

We got a 10 year fix to pay 200k back it’s 2k a month which is a stretch as interest only was £300 but you settle into it. Depends how much you owe. Speak to a mortgage broker & look on Martin Lewis Money

Our mortgage will be paid off within the next few years and we've done it by:

1. Borrowing only what we were comfortable paying back. So instead of buying a house at the max value that the bank were prepared to lend us, we worked out what we could afford to pay back over a shorter term.
2. Not buying a huge expensive house for the sake of it.
3. Every time we've needed to remortgage we reduced the term.

I paid mine off myself. I did through a combination of things, the first of which was move to an offset mortgage and start saving into the offset savings. This basically started my pay off mortgage fund. Then any time I got any spare cash, eg occasionally get small bonuses at work, I had some shares from a previous employment employee share scheme which I sold etc then all that I put that into the offset. This way I gradually built up the offset, this also meant that my monthly payment paid off more of the capital too and eventually I had enough to pay off the actual mortgage. It was also 3x my salary.

Just start today, for starters. Even small amounts that chip away at the capital amount will make a difference.

You've at least had a substantial equity rise from the sound of things so the alternative would be to downsize in time. But if you don't wish to do this then you need to make a dent in the capital by overpaying.

Do you both have pensions?

Interest only mortgages aren’t inherently bad if you’ve got the discipline to be making capital repayments or investing the money appropriately over a long-term. Most people don’t have that discipline which is why they’re much harder to get.

It is not an insurmountable task if you switch to repayment or commit to making significant payments on your current deal (assuming you’re allowed to overpay) but if you want to keep your house you need to make a plan and stick to it.

Incrementally over the life of a mortgage that is not interest only. Bought c.19 years ago. Paid in more when had a bit spare. Enjoyed much less disposable income. You can only spend money once. Depends on your priorities.

We've gradually paid ours, adding extra when we could, until it's now very little. At this point I choose to save rather than pay it off in it's entirety, which we could do, as the repayment is very manageable and we have a pot of money should we ever need it. Once that pot grows more we will possibly pay the remainder off in a chunk. We earn ok salaries but not anywhere near a lot of the salaries declared on here. We've worked hard and it's a nice position to be in. I would maybe aim for this sort of position as it's realistic and moving you in the right direction.

Check out somewhere like Dave Ramsey, or if you want to get extreme, Mr Money Mustache

Can you switch NOW to repayment of principal and interest? The only way to pay off your mortgage is to start paying it off. Every penny you pay off is 1 penny less you pay interest on. You should consider doing a much stricter budget to add as much as you can to the mortgage for a year and see how that goes, then when you ease off the budget a little it will feel luxurious and you’ve built up good habits. Much better to be cutting back now to pay a mortgage than to have lived very comfortably now and be selling the house later as you can’t afford it.

As others have said, act now in switching to a repayment mortgage. In theory you can get a mortgage term up to 75 years old now if you can prove pension income.
Then when kids have left home, downsize, which will pay off any left over mortgage.