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.

I think you can normally repay 10% of the capital amount a year without penalty. I’d check if that was the case and then just chuck money at it. Bit in savings etc

You really haven't had a good deal unless you were putting money away to pay the outstanding balance in a high interest account. Also house prices may well take a dip and you would have less equity. I would have a family discussion and look at options and have a plan .

I get it, we're on interest only as well. Though managed a 2.2% deal for ten years so not too bad.

On good salaries but opted for a lovely, big house which we pay much less for on the interest-only payment than we would for a small 2-bed house around where we live.

We want to live life to our fullest now, whilst we're healthy (late 50s) and the kids are around plus school fees mean a repayment mortgage now would limit what we could do as we priortise school fees, activities/sports, going out for meals and holidays (we don't go silly, one longer one and maybe one weekend away) to savings although are paying into pensions.

We do have other properties and plan to pay off the mortgage with the equity from one of those. We could also part rent out our house as well to keep us going when we retire if needed, or we'll sell up and downsize and our house would have increased in value by a lot in that time.

I know we're very lucky and probably could have been more savvy re finances but just sharing this as interest-only can work for some people.

Depending on how you do it, it's nothing like renting as you get to enjoy a house that is larger, gain equity (and as it's a more expensive house, the gains are higher) and you have flexibility to let out parts of it too.

You can start saving in a isa with intention of moving it to the mortgage.

Also have you sorted your life insurance, many of them pay off the mortgage if the worst happens (not pleasant ideas but important to have in place)

@SparkleShineRainbow I have never gone for interest-only so that even a little bit of capital is always repaid each month (I recognise you probably have some kind of endowment policy designed to mature and pay off the capital at the end but I never liked the fact you still owe the capital at the end having seen someone get caught out). The other thing I’ve done is leave payments high when rates get cut so effectively over paying. Likewise saving any pay rise in a savings pot (in some cases offset against mortgage). This shortened the mortgage term overall as the capital amount owed decreased sooner. I have never had any money from anyone.

We paid ours off by overpaying (I think we were paying double) for the last few years and chucked a bit of savings at it as well.

What are you paying off monthly now-can you increase that? What would the repayments be like if you stopped being interest only?

Theres a lot of comments on this feed so apologies if I'm saying something already said but I havent read all of the responses.

Interest only means the debt is always there, however what a lot of people dont realise is that as circumstances change you may not always be elligible for that loan, and by that I mean you need to take action now.
Say you bought at 30 on a 25 year term and are now 45.. 10 years from now when the bank asks for there funds, you'll need to find them or sell the house. If you dont have them in full youll need to ask for another mortgage, at that point because most banks will only lend to 70 they will be assessing you repaying in full over 15 years which gets very expensive even for a 6 figure salary and the bank will assess if you can afford that.
Another common misconception is equity... the bank doesnt care how much you owe. You could have a 4 million pound house and owe 400k... they will still only be able to lend if you have the means to repay the 400k.
The longer you go on the more opportunity for change in circumstances. If you lost your job is it replaceable at that income. As you age are you able to continue at that level as it stands at the moment youll have a hefty payment until your 70, I know so many people kicking back at 60 or retired already... you wont have that option.
Sorry to be on a negative but you're in a difficult situation and need to prioritise stability.
If you dont value your house then downsize or move to a more affordable area. You have lots of choices if you have equity but you need to make some decisions and ASAP

We enjoy a good standard of living, holidays and kids activities etc. We spend most of what we earn.

Well that's going to have to change. You have maybe 10-15 years left to pay of the ENTIRE capital of your mortgage which by my fag-packet-reckoning is min £300k. Or at the end of your interest-only term you're going to have to move and downsize hugely.

Might be OK if the kids have left home by then, but it's still a huge upheaval when the time comes.

I think you were incredibly poorly advised at each and every step of your mortgage journey. This is even worse than the endowment craziness - you literally have no repayment vehicle.

We are in London and should be mortgage free within the next 2 years. Have lived here for 9 years, always overpaid as much as we can and paid off as much as allowed when remortgaging.

Mortgage was originally over £500,000. Monthly payments over £3,000.

We recently paid our mortgage off after 5 years. However, we didn't borrow too much as we had quite a big deposit from selling our flat plus savings. We also went for a house we could easily afford as we were planning to have children and I wanted to have the option to take some time off work. My DH also got a big promotion a couple of years ago which enabled us to overpay and save more to pay off the final sum this year.

Are you planning to downsize/move to a cheaper area when your children move out? If you're not planning on moving I would be concerned and start paying down the capital now!

If you intend to stay in this house past the end of the term (ie: don’t take the equity and run), Go speak to a broker like Countrywide asap and switch to a repayment mortgage, likely on a longer term. Then start saving everything you can in order to make overpayments. It’s not impossible to get it paid off but it may be painful.

Of course interest only is not a good idea. We paid off our mortgage before we were 40 by overpaying monthly when interest rates were low. We had a target to pay it off, quite simply we divided the balance by the number of months left and tried to stick to that contribution each month. (Obviously this needs to be realistic). My advice is to pick a mortgage with no overpayments.

Being interest only, what vehicle did you put in place so that the capital would be paid off at the end of the mortgage?

At the moment you are not paying down any of the debt, so starting to make some additional payments to the mortgage will bring down the amount owed and start to reduce how much you’re paying in interest.

You need to look at your mortgage terms - some lenders allow unlimited overpayments to the mortgage without penalty (that’s how we paid our mortgage off 10 years early). Others allow something like up to 10%
of the outstanding balance each year penalty free, some may not allow overpayments at all. Depending on your terms will impact the way to tackle it.

After you’ve got a bit of a savings buffer to cover you for things like an unexpected bill, out of work for a while etc these are the options I’d consider:

unlimited over payments - each month put in an additional amount you're not gonna miss - even £100 will slowly build up and reduce the interest, or the day before pay day move across any spare cash you have left into the mortgage. (But if on a fixed rate don’t pay off the whole balance until the end of the fixed rate - otherwise you could get hit with an early repayment charge)

limited over payments - same as above, but keeping in mind that you can’t go over the maximum amount as you’ll likely incur early repayment charges.

no overpayments allowed - open up an instant access savings account with a decent rate ( eg Marcus, Atom bank etc have some reasonable rates for instant access accounts) or a regular saver account if you can commit to a set amount each month. Start saving in there and whenever your lender allows you to make an overpayment - e.g if you’re remortgaging , then use the savings pot you’ve build to make a lump sum reduction to the mortgage. Remember a lot of regular savers will penalise you for accessing it early, so think about timings as to when you’ll need the funds before considering locking money away for a fixed period.

Whilst you’re saving it’s not reducing your mortgage interest, but at least you’re earning a bit of interest on the savings pot to counterbalance some of the mortgage interest accrued.

interest only mortgages can be very beneficial, but you still need a projected plan in order to pay off the house. Currently you don't own it! You ideally would use the higher salary amount to save and chip away at the actual capital, or you sell another asset and pump that money into paying off the mortgage, or you get a repayment mortgage.

You may have equity in the house, but you can't realise this until you sell the house, and then you will have other costs due to the sale of the house and unless downsizing and/or moving out of London, your next property is likely to around the price you sell at, so still no housing security. You really need a plan!!!! Interest only mortgages are not a long term plan, unless you are sure of your means to pay off the capital.

I don't understand.

You don't have lots of equity if you've paying interest only. You'd only get that if you sold?

Atm you're not paying your mortgage all all, let alone paying it off? How much do you have to actually pay it off?

We've paid ours off in 10 years as our salaries increased but we stayed in a cheap property and saved £100k in that time to pay it off. Overpaid for the whole 10 years as well, but you'd have to start repaying capital to do that and reduce your outgoings significantly to save a lump sum.

I’ve had an interest mortgage for the last 10 years, we saved and was going to use that to pay it off but then we had the pandemic and all our savings got eaten - so we were going to sell and downsize as we have to pay it off in about 4 years time, however we’ve just inherited a house which we plan to sell and that will enable us to pay off our mortgage.

Definitely switch to a repayment mortgage, you should be able to get a decent rate if you’ve got equity in the house from its value going up.

Look for a mortgage where you can overpay at no penalty but also use your overpayment to pause payments if needed.

I did this and have tried to overpay a bit every month even if it’s only £50. The overpayments add up over time and help clear the mortgage faster as well as reducing the overall amount of interest I have to pay. It means I have less in savings but in the worst case scenario eg if I lost my job, I can use the overpayment reserve to stop paying the mortgage for a bit while I get sorted.

I think you need some proper financial advice - this could just be a financially savvy friend, but a professional may be of use as well.

You should consider all your finances not just mortgage. So pensions, savings and spending. Between you there is a very good level on income, and good equity in a house.

Without repaying or saving to pay off the mortgage though, you are storing up an issue for the future.

For me I:

• save a little more into a salary sacrifice pension than I 'have to', as I am fortunate to just be over a tax threshold (I am in Scotland so different income tax rates) so can reduce my tax a good amount and then save that amount extra into my pension. It costs me no more than paying the tax, but I benefit in my pension. I have also chosen my pension and check it every 6 months for performance.
• save each month into a few accounts as 'slush' money - so a car & house account, holiday & fun account, kids & uni costs savings etc. This means when bills come in (the car is in the garage today) I have savings to pay the bills. It took a couple of years to get to this place, but it is reassuring to not worry about surprise bills.
• save each month into a good interest rate saver (6%) towards paying capital off my mortgage. This account is now a good chunk of money.
• overpay the mortgage by about 15% - but I can vary this amount on a tight month or if I find I have a few quid spare.
• I only have a very small car loan (£1.5k) and mortgage as debt, and have now got to a place where I can afford to pay for things like car insurance in one lump sum, so saving a few more quid which I also 'save' into my savings accounts.

I am fortunate to earn higher than average, and have a house I am paying down very rapidly now. My mortgage is about 1/3 of what the house is worth and currently fixed at 1.17% until 2028, so between usual repayments and overpayments and savings my mortgage will be paid off 7 years early, and will be paid off in 6 years I hope.

Money saving expert has a great mortgage overpayment calculator.

All of this takes effort and a focus on balancing spending today for enjoyment with good financial stability for the future.

The day after payday, put 10% of your net income into your mortgage for 6 months. Then make it 20%, if you can. Then 30 It's fairly straightforward - you'll never pay it off if you're only paying the interest!

Sounds like you owe over half a million pounds so you need to start repaying as much as you can ASAP!

I had an interest free mortgage - I just overpaid when I could afford it, paid it off about 15 years ago. The only penalty was completely paying it off before the term, so I had about 5 years with a balance of around £500.
it's good to have a small amount of savings for emergencies, but the interest earned won't be as high as you'll be paying, so overpay now if you can without penalties, otherwise save as much as you can, and pay off a chunk when your current fixed term ends.

Definitely start paying it off! Interest only feels so risky

We had a interest only mortgage for about 10 years, the difference was that was never going to be our family home - it was in central London so we knew that we were pretty much guaranteed a huge increase in equity, so when we sold we were able to pay off that mortgage and have a decent deposit for a house which we we now live in and are on a repayment mortgage. I am really shocked that anyone would be on a long-term interest only mortgage with their family home. I know what is done is done, but that's really irresponsible once children are involved.

In your position I would seek some advice from an independent financial advisor - and fast!

Husband self employed, earns a bit above UK national average.

Does he do most of the childcare?

Is his business going to be successful soon?

I have no experiences of mortgages so can’t comment on that.

But I’m wondering why he is on NMW and self employed.
Being SE is apparently pretty stressful, long hours and of course the income isn’t guaranteed.

I’m wondering if it’s not just easier for him to get a job in tesco or something for the same money.

I personally would be getting a career whilst he’s still young enough to do so.

You are obviously on a great wage and so his income isn’t that important but I think the stability would be.

If you separate he’s going to be screwed or if you lose your job/become ill and can’t work for a while then you’re all going to struggle.

You have had 10-15 years of an interest only mortgage when interest rates were at historical lows and have focussed on spending rather than saving. I imagine your pensions are also quite small if the focus has been on spending and one of you is self employed.

When you start saving what you need to pay off the loan value of your house AND start saving a realistic amount into your pension to fund a decent retirement you are going to experience a drop in lifestyle. But you need to do this as currently you are living beyond your means and jeopardizing your security in retirement.