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.

Talk to an accountant. We had an offset account and a great accountant giving advice.

We repaid our mortgage early at 17 years, rather than over 25 years. This is how we did it.

1. Had a repayment mortgage
2. Always fixed, and when remortgaged reduced term by 1 year
3. Maintained monthly payment (so if new interest rate lowered monthly payment we kept it at what we were used to paying
4. Only had 2/3 years of nursery fees, and once finished always over paid by min £100 per month, but at the end that increased to £1000pm
5. Actively bought houses that were 'enough', so did not overstretch ourselves. Could have 'afforded' much more expensive property's but we just didn't want to have to repay huge sums back

We did this by our late 40's but still had lots of holidays, trips and spends, so didn't restrict our lifestyle in any way.

If you are serious about this you need to get some qualified and expert financial advice. Before that you and your husband need to reevaluate your priorities and goals.

In the past you made decisions that prioritised the then present. In hindsight they look risky in terms of now and the future but they could have been your only choice. That is it, planning is about priorities, options, choices and appetite for risk. Some people never plan and they get by. Others don’t. There will come a point when you either can’t work or you don’t want to work. That is hugely enabled by not having a mortgage and having a pension.

There’s a lot of variables that mean your singular ambition might be not the only thing that matters. There’s planning for retirement, whether your children plan to go to university, if you can improve your income and if you have jobs security, your ties to London and that specific house, your ages etc and what you are willing to sacrifice in terms of lifestyle.

You need to be on a repayment mortgage. Almost all mortgages for a domestic property are on repayment terms, because otherwise there is no mechanism to pay it off.

Investment property can be on interest only because the entire point is to make money and then sell.

Move onto a repayment mortgage immediately and then start paying it down. The last decade you have effectively been renting.

So start again now with repayment, even if you have to have a long repayment term you need to start paying it off.

We pay ours off by overpaying every month and chipping away at it. We switched to a variable rate at the beginning of the year and are on this for 2 years. I set up a standing order to continue to repay the same amount as we were going when we were on a fixed rate as on the variable we can overpay as much as we want. When we were on fixed it was only 10% of the capital amount a year.

I think you need to reframe your “we are incredibly privileged” mindset to “we have been incredibly financially irresponsible”. Sorry if this sounds harsh but I’m assuming you’re on a max 25 year term, that means in 10 years the bank will demand repayment of your mortgage in full or repossess your home. Will you meet the affordability criteria to move to another lender on capital repayment? Sounds unlikely if you only have 10% spare.

Can you cut back to afford the £3.3k a month needed to pay off the capital in the next 10 years? How old are you and when do you plan to retire? I would look to move to capital repayment taking you up to retirement age as soon as your fixed term ends, but be prepared this is likely to increase your monthly mortgage payment by at least £1.5-£2.5k a month unless you’re young (under 40ish). Failing that you will need to downsize to somewhere more affordable for you.

We paid off early without any help.

What helped us

1. we upsized from a flat, which had gone up in value by £100K in the time we lived there.
2. we bought well within our means. Between the sale price of the flat and our savings, we borrowed only half the cost of our house
3. we had an offset mortgage, so every penny on the positive side was working against the debt of the mortgage.

the main thing
4) we bought this house in 2011. Interest rates were very low compared to now for all the time that we had the mortgage.
That is sheer dumb good luck.

5. We only managed to have one child so we never needed to upsize or extend. That wasn’t good luck, but it is what it is.

So, having taken the mortgage in 2011, we had ‘broken even’ on the mortgage in 2015 (not paying any interest). It was completely done a couple of years later, but I’m not sure exactly when as it wasn’t costing us anything.

Now we are at the other side and looking at when we could retire, I wish that we had put the money into ISAs whilst we were paying small amounts of interest (10s to low 100s pounds per month, as you can’t get the cash free allowance for those years later on.

I don’t think you can do it if you’re spending much of what you earn. We were on £70K each at the time that we paid off the mortgage. I don’t know how that compares to your salary with average bonus. But I think the take home will be more, but in the same ballpark as yours. We lived off one salary and saved the second. It’s a fortunate position to be in, I know.

Nothing new to add but to echo many others; the interest only mortgage will not able you to plan ahead and pay off your mortgage. That's the first thing that needs to change.

We paid off our mortgage when I was 48, husband 52. We did it on average jobs, no cash injection or inheritance. We did move from the south back to the north in 2010 which helped as we got a lot more for our money where we are now so we overpaid every month.

I am surprised you were able to get interest only without some evidence of a repayment vehicle.

We are close to the end of our London size mortgage and it was down to the discipline of regular payments and overpayments just like most people on this thread. Our LTV is in single figures and that really does give peace of mind.

You need to switch to a repayment mortgage or move to free up equity.

There used to be rules around not allowing interest only mortgages for domestic homes to prevent this situation.

Normally if you take interest only you have to set out how you plan to pay off the remainder. What did you say?

We haven't paid it off yet but are getting there, but I don't know how you would ever pay off an interest only mortgage unless you had been saving a decent percentage of income from the outset.

You switch to a repayment mortgage. You pay off as much as you can until your planned retirement age.

Then, to become mortgage free when you retire, you downsize and/or move to a cheaper area. You buy a house that you can fully pay for with the equity in your current property.

So let’s say you have (made up numbers) £150k equity now, and you can pay off a further £300k before your retire, you would move to a £450k house when you retire to become mortgage free.

I probably have a mortgage not far off yours and a household income much less (at least 50% less by the sounds of it) because I'm part time at the moment but still manage to pay the principal off (mortgage payments £1500). Even though you're interest free there's usually allowances to overpay 10 or 20% a year so maybe start overpaying by at least 2k or more a month (but anything is better than nothing)

I did pay my first mortgage off with a £60k inheritance from a parent but it was a small mortgage and I was overpaying substantially before having kids so I paid a £175k mortgage in less than 10 years with that help (so I was under 40 and mortgage free for a while)

I think if you're daydreaming of lottery wins you've got your head in the sand about your ticking time bomb of debt. You are in a privileged position most can only dream of, don't fritter your disposable income away on nonsense like flash cars and clothes, get your mortgage debt sorted. You don't want to have to sell your house when you retire and scrape by. Xx

It’s crazy to my mind that you are on an interest only mortgage. Most people who are fortunate enough to be home owners will pay off their mortgage eventually, not necessarily early, but eventually because they are on a repayment mortgage. To have no vehicle to repay it is madness really. I don’t know any home owner who has no vehicle to repay the mortgage on the family home. I don’t think this is a case of you paying your mortgage off early. But I do think this is a case of you needing forthwith to see an IFA to sort out a repayment mortgage.

I had a repayment mortgage plus regularly paid over. I would recommend getting qualified financial advice and working out a long term plan.

We did similar

We have always had a repayment mortgage, but now we have higher salaries we pay off several thousand extra each month. Interest only for decades when earning a decent salary is daft.
ETA NatWest allows us to pay off 20% each year. They allow this on repayment and interest only mortgages.

We have an interest only mortgage as our finances fluctuate. However the deal allows us to pay off up to 10% a year without penalties - pretty standard, you should check yours. We aim to do that each year. Don't always manage, but it means that debt and interest payments are already noticeably lower.

The hope was then to have some savings when the current five year term comes to an end so that we could remortgage with a lower amount, which if low enough would be on a shorter term repayment basis.

We had an interest only mortgage from 2002 until 2014.

This was to allow us to get on the housing ladder when our salaries were low and then latterly when we were paying for 2 x nursery fees.

As soon as we could afford it we went on to repayment AND overpaid.

Overpaying has helped us not suffer too much from the interest rates rise - that and leaving negative equity (now we have a LTV of 43%)

We still have 20 years left in our mortgage.

Our 1.89% fix ends soon. We're jumping to 4.11% but because of overpaying and house value recovery we'll only pay an extra £40 per month.

So we're still doing it, and will be for years but the HOW = repayment mortgage and overpaying.

In the 5 years preceding now with the 1.89% fix we cleared £58,000 off the principal from our mortgage.

It feels so freaking good!

We did yes, and of course I would recommend it!

We did it via a repayment mortgage, wouldn’t dream of IO, plus overpaying monthly, increasing the amount of overpayment annually and paying lump sums off when possible.

We then put the extra ££ into pensions and ISAs fir a few years, then retired early. Definitely recommend.

Start making capital payments to reduce the interest ASAP.
Overpay where you can.

Interest only on your income is madness.

If you have had an interest only mortgage for the last 15 years with the low rates your payments must have been small - it is a shame you didn't save the money as now interest rates are higher and you have to pay it back in a shorter time period so a double whammy

You definitely need to make a plan for repayment. Work out using a mortgage calculator what the monthly payment would be for your current mortgage balance over your current term left at your current interest rate and start paying that at the minimum.

We overpaying what we can without penalty and putting money aside. We remortgaged when it came up just before the jump at least at 1% on a repayment mortgage. After 20 years caught in the rent trap I still pinch myself we got no landlords coming in unannounced. (We knew they can't but they did). Try and save if you are on interest only. I didn't know they still did them. I don't think you can pay off at the moment.

When we bought our first house in 1997 or 1998 we had interest only with endowment, that was a very common way of funding the purchase at that time. But by the time we moved into our second house in 2002 and remortgaged, the advice had changed and everyone was advising against interest only unless it was investment.

It was a very risky decision OP and agree with everyone else that all you can do is to make the switch to repayment as soon as you possibly can.