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.

Can only echo the many other posters who have said to get on repayment at the earliest opportunity, and to make sure your protection policies are up to date.
I think you need to make some serious changes OP if you ever want to own your home outright

Why on earth have you only been paying interest instead of capital too?

Also, why on earth is this in AIBU instead of property or Money Matters? Ddi you want a stealth boast? (It's not actually the boast you think it is: see my first question)

Pay fortnightly instead of monthly. It saves you heaps and speeds up the process.

www.loans.com.au/home-loans/first-home-buyer/does-paying-your-mortgage-fortnightly-save-money

we paid off our interest only mortgage some years ago, we had an endowment policy to pay off the capital. it took awhile but at the end of each year if we had savings we paid a bit off. Savings interest rates were so low and bank interest high so it was worth it and reduced the amount we had to pay each month. And the endowment policy was a bonus to us at the end. so if you have some spare savings I would say go for it if yours is interest only.

I mean what you've done isnt smart but you have had equity gains which depending on size would pay for a smaller house you can downsize into

I'm not your target audience as we dont plan to overpay simple due to our circs.

You need to work out whatyour surplus is and start overpaying or save the surplus gain interest and then pay it down it down once your mortgage lapses

You are not as privileged as you think in the slightest! Your mortgage provider is funding your lifestyle and you will have to pay them back. You’re basically going on all your holidays using a limitless credit card. Bonkers!

Do you really believe that everyone who pays off their mortgage has done so with help of parents?

Most people pay off their mortgages, by actually paying off their mortgages. You need a repayment mortgage ASAP, move somewhere cheaper if you need to.

Keep your current mortgage deal and look at the terms for paying it down (overpayments). Then look at what you would pay if you were on a repayment deal at current rates and transfer the extra into your mortgage every month. Sounds like if you put all of it into savings you'll spend it.

Instead of the lottery put money into premium bonds. You still might win big.

Ours is not paid off but we are still youngish under 40 but should be paid off in next 6 years. We overpay our mortgage. This eats into the interest charged and you pay it off a lot quicker. We have repayment I would never get an interest free mortgage that would worry me. If you can pay even 100 extra it helps. We bought our house 15 years ago it was a do up job so cheaper to start with. I understand if we bought now house prices have doubled so wouldnt be possible on current prices. If you overpay but under 10% per year there aren't any extra charges.

In your shoes, with a good interest only deal, I would make sure I saved extra every month into an ISA or similar and use that to reduce the principal at renewal time
That's more or less what I'm doing, though I have a repayment mortgage so I'm saving more to overpay

I don’t see interest only as such a bad option, when interest rates have been so low until very recently. Our interest only is 0.5% fixed for 3 years prior to rises. We have savings to cover earning 6% interest, which I think works out better even allowing for tax on interest above allowances. Also good to hang onto an interest only as they are hard to come by now and if times get very hard they are cheaper than a repayment.

Just because your mortgage is defined as interest only, doesn't mean you can't voluntarily overpay. You just contact them and change your monthly payment amount. The only thing you have to be careful of is that you don't over pay by more than the lender's annual limit. Whenever we have done this, the annual limit is 10% the value of the mortgage. So you can actually overpay quite a lot each year before triggering a fee.

Interest only is effectively renting. You have paid nothing off and so if you sold, you would receive very little if anything (although it’s worth checking this with your mortgage company).

Switch to proper mortgage sharpish!

I would pay it all off the mortgage, if there is any remainder afterwards left on mortgage then switch to a repayment. An interest only mortgage is only for the very short term. Yes you have equity but lots of that will be eaten up when you have to repay the mortgage at some point.

Well you aren’t going to pay any of your mortgage off if you’re on interest only. Most people I know opt for a repayment mortgage.

I second the advice re protection policies. Maybe you should think the unthinkable OP. If you died your lowpaid DH would struggle to pay the mortgage alone, so insurance is vital. Do you in particular have permanent health insurance? You are bringing in much of the household income.

In the event of divorce you would (probably) get 50% of the equity each, so really difficult for both of you to buy or rent in London I assume?

Sorry to be gloomy, but planning for worst--case scenario is prudent.

It's also very hard to comment without knowing the exact figures. An 150k mortgage on a 1 Million pound house at a 1% interest rate, with 20 years left, I wouldn't be too worried. A 300K mortgage on a 500k house at a 5% rate with 10 years left- terrifying.

This is what my mum and dad did and they they paid their mortgage off - the endowment, thankfully, covered the capital and they had made a slight profit (a few thousand, not mega bucks), HOWEVER, that was over 30 years ago. I feel the mortgage world has shifted since then.

It sounds like OP hasn't been making any kind of savings provision.

@SparkleShineRainbow you either change your mortgage to repayment or start saving like crazy. Please get some proper financial advice

Thinking about it, you may be being unreasonable or at least unrealistic to think you can pay off your mortgage when you have only just started thinking about it after many years paying interest only, and are now asking on MN instead of taking proper advice, or even just researching the options for remortgaging etc yourselves. Not that there isn't good advice on here, but it feels a bit like an avoidance tactic. You'll have to make some big changes to get on track to paying it off in the next decade or so.

You have been living beyond your means for years if you have had IO mortgage.

Now is the time to start repaying mortgage before Uni costs and you get older with potentially health issues.

We are early 40s and have not paid off mortgage yet, but plan to when our 10-year fix comes to an end in eight years (managed to get a good deal just before the interest rises took off!).

We are in the SE and our household income is probably much less than half of yours, but we try to be fairly frugal and are currently saving £1k a month (which is between a quarter and fifth of our take-home) in a reasonably high-interest account (it's higher than the interest on our mortgage which is why we're saving and not paying off each month). If all goes to plan, in eight years we should have more than enough saved to pay it off.

We're prioritising this over, for eg, house renovations, extravagant holidays, a new car or moving to a bigger house.

I considered an interest only mortgage because I have investments that can pay it off if required. In your case you didn’t have the investments, you didn’t save for 15 years, so the only option is for you to sell.

How is your pension situation?

We didn't save (except for a small float in premium bonds to tide us over in an emergency), instead we overpaid as much on the mortgage as we could afford every month. When rates dropped we continued making the old higher payments. When one of us got a pay rise we'd add half the take home extra to the monthly mortgage payments. Same if we won a premium bond, normally £50. We'd keep half for a little treat and pay £25 off the mortgage.

Of course £25 off a £400k mortgage is nothing but it's £25 you never have to,pay interest in again. It's the miracle of compound interest. Small extra payments here and there while continuing to pay our old monthly instalment brings the outstanding balance down faster than you'd expect. Of course £25 off a £400k mortgage is nothing, but it's £25 you never have to pay interest on again. By the time we were 51 we had paid off the mortgage and were debt free in a 4 bed house in outer London.

it makes no financial sense to be saving 10% of your salary in an account that pays say 4% if your mortgage rate is 5.5%. You will get a better return by overpaying your mortgage. .