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.

Speak to an independent financial advisor.

I'd also suggest looking at the moneysavingexpert website both on your own and with your teens. Financial literacy isn't really taught in schools so they may also have gaps in their knowledge.

You've got this. You've noticed an issue with your finances in ten years time and are acting now to fix things.

Another route is using any pension savings, particularly taking a lump sum from a pension. Are you saving anything into a good pension?

Late 40’s and i have 4yrs left on my fixed deal (9yrs in total) and have the funds to clear it now but going to wait until the end of that period as it would wipe my savings out to an a uncomfortable level. How…..single income, no kids, haven’t moved house in 16yrs so mortgage is relatively low….also saved quite a lot during lockdowns.

So yes we are mortgage free.
It happened because
1- we were repaying the mortgage, not interest only. You should have done that as soon as you could really. Before hols, renovations etc….
2- we actually repaid more than the minimum .

If your mortgage is fixed for a while now, you need to put the money you’d pay for the mortgage aside. Not just as ‘savings’ but as the mortgage, in the top of the savings.
Look at it that way. At some point, you had children in nursery. You could pay for it. Use that same amount to pay the mortgage. It will be at least £1000 a month?
It will eat you need to budget. You might have to scale down your hols.
But the relief of knowing you have and always have a roof over your head is immense imo.

You still have time if you’re only 15 years in.
Keep your mortgage as is until the low rate runs out, then change to a different plan for repaying it (that allows you to over-pay).
Use this time to start building up savings. Don’t do the lottery - invest in NS&I premium bonds instead and every £1 invested has a chance of winning.
Set up ISA’s for both of you (and the DC) and set up meal plans, date night plans, holiday plans to save for these rather than spending Willy-Nilly.
Economise - make packed lunches if you find you’re paying shop rates for sandwiches, cook from scratch and fill the freezer at the weekend for the week ahead.
Decide how much to spend on kids activities, clothing and “stuff” from Amazon - and stick to it!
You can definitely do this on the income you have, so good luck😁

I wouldnt touch pension.
The state pension is already quite low. You really dint want to end up with just that.

Using your pension is effectively ‘stealing from your own retirement’, and will result in even lower income then, definitely best to pay your mortgage out of income earned whilst working (i.e. much higher!) if at all possible!

We cleared ours a few years ago and went hardcore on it to clear it.

I would suggest

1. Draw up a budget on Excel, list any debts, savings etc there is a statement of affairs template on money saving expert website
2. Find the details of your current mortgage, what interest rate are you paying, are their early repayment fees, can you overpay without fees, if so how much
3. Is it worth remortgaging?
4. Are your bills as efficient as they could be? Any money you can save on renegotiating phone contracts, cut down on subscriptions can go on the mortgage
5. setup an account on money saving expert forum and post on the mortgage free wannabe board. You will get constant advice and support and read other threads for ideas. You can keep a diary and it’s a long journey that will change constantly
6. Play with the budget and figures, we decided to have one old car, cut all subscriptions but Netflix, keep the heating down, budget for holidays was small etc
7. Don’t forget to pay into pensions

We had a repayment mortgage which allowed 10% overpayment per year and there were no restrictions on payment size. I transferred any spare cash I could, whether it was a £50 bonus, 50p I found on the floor, money from decluttering etc. Our mortgage statement was pages. But the sooner you pay the money in, the sooner you start saving on interest

We kept the mortgage payments the same or increased them when we remortgaged by decreasing the term. At the very end we were paying about £1500 a month or more for a tiny mortgage. If we had any spare cash we also paid a lump off when we remortgaged.

If you know you’re not gettting inheritance and you only started saving recently how did you plan to pay off the capital of approx £400k? Moving?

Op. When you’re on a repayment mortgage. The capital sum reduces. Which means the interest does, as the more you pay off the capital sum, the more it reduces and then the interest is applied to the continuing reduced capital sum, so it’s less as its interest charged on a Lower amount.

most people then keep their repayments higher, basically the same as before, or close to, as the interest reduces, meaning they overpay the capital sum each year to what is permitted in the mortgage terms, often ten percent, which then again reduces the interest due, as the capital sum is constantly being paid down.

after 15 years a significant amount of the initial amount borrowed would be paid down, giving vastly reduced interest due, allowing many people to pay off early. Or they just pay the reduced amounts and clearing it after the 25 years or however long they borrowed for.

a mortgage is simply a loan, like a credit card or any other type of loan. You need to pay back what you initially borrowed, not just the interest on it.

paying it down means your home is protected, should anything happen to either of you or your jobs. As a mortgage is a loan where you used the property as security, the lender has a charge over it. And any inability to pay can see them force a sale and take their money back, inc Any interest owed. A repossession. Every single person whose home has been repossessed could comfortably afford the repayments when they first borrowed.

the amount of interest you have paid will be shocking. As your capital sum you borrowed bas never been touched, as such the interest was always on the maximum amount, it never ever reduced as you never touched the initial borrowing.

as such, the choices you’ve made have cost you thousands and thousands in additional interest payments, if you did the exercise to total up how much more in interest you’ve paid every year as the repayment sum was never reduced and interest applied to the full amount, it would be horrifying. Plus at the end of the mortgage, the full sum is still repayable.

in reality you’ve not just spent what you’ve earned, you’ve been basically borrowing heavily to do it, every single day you don’t pay anything to that initial sum is another day you’re borrowing it.

We are in London and paid off mortgage after 14 yrs. We made the same payment from the start despite it decreasing and benefited for several years by being on a very low base rate tracker. We had no support from anyone. It was paid off by using some of our savings. The house price was only £250k when bought in 2005. Felt great to pay it off. I’d recommend it but we had a repayment mortgage so different position to you.

I would suggest you both need to be on the same page regarding spending, because paying off the mortgage will reduce your disposable income, which I am guessing has been plentiful.

Start saving chunk of money every month that equates to your mortgage being on a repayment plan (I'd say a minimum of £1000 month considering the size mortgage I think you have), then use that lump sum to reduce the mortgage when you can (that will depend upon the terms of the mortgage) until you are able to remortgage to a repayment plan.

You don't mention if you have other debts, there's usually an order for addressing theses for financial health, and clearing those are often a step towards clearing your mortgage.Take a look at Dave Ramsey videos on FB, he is very straight talking.

repayment mortgage for 10 years, overpaying a bit, then a small inheritance cleared the rest. A much better use of the money than an expensive holiday or regular luxuries and it left me lots of choices.

The difference between your interest only mortgage and OP's is that you have a clear and sensible plan to pay it off.

We started with interest only (took it out when endowment policies were still a thing), but over the years we gradually switched to part repayment/part interest only, and latterly all repayment. We still had the endowment, which paid out a decent lump sum in the end, and also had an offset mortgage which tracked base rate + 0.25%.

Interest only with no plan to pay off seems very foolish these days, especially with the higher rates, and I'd be amazed if your mortgage provider wasn't writing to you regularly (annually) with letters saying 'make sure you have something in places to pay your mortgage off'. We were forever getting them from Barclays - we were in no doubt about the situation.

If I was you OP, I'd be doing some pretty extensive scenario planning, as paying off the entire balance in 10-15 years is going to be a challenge!

We had a tracker repayment mortgage which we took out when rates were 5 or 6% in the early 2000s (it was base rate plus a small percentage), when rates dropped we kept paying the same monthly amount. We also didn’t upsize, we stayed in a 3 bed semi. Also, forgot, it was an offset mortgage so we kept all our cash savings in the offset pots to reduce the amount of interest accumulating. Not sure if these are still available.

We had an offset mortgage and put all savings and salary into that account to reduce the interest, and paid more than the minimum monthly payment. Paid off in 12 years rather than 25.

We are downsizing to get rid of ours but we have also been on repayment mortgage and regularly overpaying. We have savings for the kids plus have worked out pensions and what we can afford and when we can retire. We earn a little more now but have mainly been at about £40k so I think on your salary you'd be able to save loads. Make a budget - how much of your income is spent on food, holidays, going out, bills etc and see what you can adjust and where you can save

Possibly a daft question... but how can you overpay an interest only mortgage? I thought overpayments reduced came off the amount you owe, rather than the interest?

Genuinely confused. Do you mean you wish you had an interest only mortgage? Why?

You can’t. No one has suggested that. But the mortgage terms may allow to repay some of the owed amount. Edit, the initial sum borrowed

@Theonewhogotaway exactly that. We have had our current mortgage for 10 years and not changed our monthly payment. That means we are easily over paying by £350 a month without even trying, now we have paid off 2/3 of the capital. An extra bonus was when interest rates rose last year and we has to remortgage, it was't such as issue for us.

Don't you need a repayment mortgage because you haven't paid anything off the capital sum yet, just the interest, apologies if the money to pay that off is somewhere else. Either that or sell and use the equity to find somewhere new.

Basically you are living for today and not thinking about future. You bought a house you couldn't pay off. You went for the easy option. You could have gone for a 40 year term, or an offset. The way to pay it off is to live as fruggly as possible. It's doable but hard. Never have loans except for mortgage, always overpay. Don't ever go to a coffee shop, don't go to restaurants. Income of 50k, 3 girls, nearly paid off mortgage on a 4 bed house. Shop around... buy stuff you need, not what you want. A treat would be a premade dinner, not a takeaway.

Pay your mortgage every 4 weeks instead of every month. even one extra monthly payment over the year can save thousands in interest.

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We had an interest only mortgage in the 90s, only 3 years, but got a letter saying how much the shortfall was,you aren't paying off any of the capital. We moved downsized, bought an unmodernised cottage on a small mortgage. Then downsized again when the DKs had all left home,paid cash,no inheritance or Injections of cash from relatives. I had been made homeless several times through no fault of my own. When I divorced,there was a crash, negative equity,I can't bear owing money.