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.

You know when you see those posts saying, how do other families do it, we have the same income, same size house etc but they can afford x, y & z. This is how they do it.

We paid ours off about 6 years ago. It was also an interest only mortgage. We made overpayments and put all of our extra cash towards it. Often nowadays with high rates its better to put the money into an account (ideally an isa) and then pay it off all at once but its dependent on the interest rate on the mortgage and the interest rate/tax on the savings vehicle.

In the nicest possible way having an interest only mortgage is madness when you’re both earning decent salaries. You are living beyond your means with no plan to maintain your lifestyle. The way most people pay off their mortgages is slowly with a repayment mortgage. The longer you leave doing this the more it’ll cost you and the greater hit you’ll have to take.

This is the only properly useful advice. All the other posts are just talking about the mechanics of paying it, which I'm sure the OP knows. The question she is asking is "how do I find the money", surely?

But yes. Set up a list of income and outgoings. Work out where the money goes. Set budgets. Cut back. Work out what you should have left. Make a plan to save that or pay it off the mortgage.

And yes, obviously move to repayment, you might be able to do that on more or less the same terms with the same provider.

But you have savings and have been investing at 6% - the OP has no savings or given any thought to how the mortgage will be repaid. Thats a huge difference.

@user7654263 @Missperfumado - the reason interest only worked for both of you is that you had thought about how you were going to repay the capital, and put aside money to do so. Of course if you do that then interest only can work very well indeed. But OP (unless there's a massive drip feed coming, where she has endowments coming out of her ears, and a massive S&S ISA and a full allocation of Premium Bonds) has no means to repay the capital. And therefore for her, it is a ticking time bomb.

We let ours run full term despite having had the means to pay it off early for several years (with no inheritance or gifts). It didn’t make sense to repay early as the mortgage was costing us less than the early repayment money was earning elsewhere.

Having an interest-only mortgage when you are not saving to repay the capital is utter madness, except possbily in the very short term if it's the difference between having a roof over your head or not.

eceryone understands this fully. However it’s irrelevant, the op has no savings,

You need to read Dave Ramsey's Total Money Makeover.

It's changed my financial life.

I understand it fully, but it's not relevant to the OP.

Just one further thought - if you're going onto a repayment mortgage I would imagine the mortgage company will require to see three years accounts from your husband's business as evidence of his income. So hopefully he uses an accountant and his business finances are up to date?

It is if she has a mortgage at a low rate. In which case she would be better off saving rather than paying down the mortgage and using the savings to pay off the mortgage when rates rise.

This only works if you are very disciplined with money.

I know people who wouldn’t be able to do that as they would save £50k and get to a fuck it, I deserve a new car, I have £50k in the bank time to spend it all on a car.

Then they will still have the mortgage at the same amount and the savings gone. If you aren’t very disciplined, then pay it off the mortgage as you are less likely to remortgage than you are to spend savings. Whilst I agree on your maths, I disagree that this works for a lot of people even if it’s just a bit of the savings that gets dipped into.

What’s the interest you’re paying? At the very least, start putting money into an account earning decent interest and pay off lump sums if your mortgage allows. Then keep the payments the same so it pays some off the capital-if that’s not possible, place the excess into an account. Change to repayment asap. It all depends on the terms of your mortgage what you can do.

She doesn't have the money to pay it off.

She would need to change it to repayment and pay it off monthly.

I don't think interest only is madness - the madness is lack of plan to pay off the house.

I've had friends who bought on interest only wreck of a place 5 year went into doing place up then went to repayment.

It's the lack of a plan how you plan to pay for the house at the end - you really need some kind of saving vehicle set aside in hope you can do that at end of 25 or 30 years.

We went with repayment because we are not disciplined. You might want to look at https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/ see how much more a month that would be for you - with 2 in secondary are they thinking Uni - have you looked at those costs coming up?

Interest-only is a mugs game when you're by nature financially incontinent and spend for the moment.

We haven't paid it off yet, but we're close - and we could do (with a small penalty). We're on schedule to pay-off over 7 years earlier than the term we took out the mortgage over. We just did one simple thing, we took a repayment mortgage and didn't allow the monthly repayment to decrease every year when it was recalculated. We didn't see the annual reduction in monthly repayments as a bonus to add to our household disposable income. If you can afford £1k/month (or whatever it is for you) when you take out the mortgage then you should be able to afford that for the next 15-20 years.

Oh, and don't fall for the property ladder thing. You don't need to be moving every 5-7 years. Not moving probably saved us as much as we've overpaid.

We just did one simple thing, we took a repayment mortgage and didn't allow the monthly repayment to decrease every year when it was recalculated. We didn't see the annual reduction in monthly repayments as a bonus to add to our household disposable income.

We did this as well.

It meant last time we remortgaged got their best rate as with overpayment we met the value loan bit. We will have to remortgage next year - and looking at figures amount left to possible interest rates - and the % interest rate jump will be huge -depending on final figures we'll see increase of 0 - to £50 at start of the next term.

I got told on here overpaying with such a low rate was an idiot move - but should insulate us from shock of interest rate rises and if it had been in saving it could easily have been spent else where.

if times get very hard they are cheaper than a repayment.

Well obviously they're cheaper as you're not paying for the actual house.

Everyone understands the benefits of interest-only, but without a plan for paying off the rest of it, which the OP doesn't seem to have put in place, the benefits don't include owning a house.

The problem is, is that OP has not been disciplined enough to save anything.

So basically they've basically been servicing an interest only loan for 15 years, not reducing the capital and not saving. This would have cost them a huge amount of money in interest, not to mention putting them at risk if they find themselves unable to continue to pay the mortgage. Eventually they will not be able to remortgage at all if they lose jobs or approach retirement age, and then what do they do?

Very true, but perhaps they didn't have the spare cash to save anything until now. I agree though that saving rather than paying off mortgage is hugely dependant on having the discipline to do just that and not spend the savings.

We still have an absolutely huge mortgage but are plugging away at it by overpaying every chance we get. We will also probably move house in 5 years to realise the value increase since we bought it. We each have some savings but I don't see the point in having more than a small buffer when we have the mortgage debt.

I don't understand being on an interest only mortgage really. I want to own my home outright as soon as possible.

Op has stated they were spending excessively rather than saving, and it's coming back to bite them.

They need to either sell up to realise whatever equity growth they have gained - which is probably less than what they think - or they need to divert every spare penny into getting the loan down.