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Original poster

Paying off the mortgage

29 replies

AntoinetteCosway · 02/02/2013 23:14

Has anyone paid off their mortgage early? Ours is a 30 year term, taken out last year, and we've worked out that with some serious hard work we could pay it off in 7 years. Everyone I mention this to in real life (well, two friends and my mother-I don't talk finances with that many people!) looks at me like I'm mental.

We're not mental are we? We'll save over £80k in interest and be debt free before 40. It'll be hard work for the next 6 years but worth it-right?! I keep thinking we must be missing something massive or why wouldn't everyone overpay whatever they could...especially while savings rates are so low...right?

OP posts:

Moominsarehippos · 02/02/2013 23:22

Check of there are any fees (overpayment or early closure). Most advisers will tell you that its the cheapest loan you can have. We are trying to pay off ours over the next year or so too.

redandwhitesprinkles · 02/02/2013 23:26

I would be very surprised if there was no early repayment charge. Why did you take the mortgage over 30 years? This is 5 years longer than normal and you could have gone with 10/15 year mortgage?

OddBoots · 02/02/2013 23:27

We've not managed 7 years but we have been overpaying so should be done in about 18 months (God and good fortune willing) which would make it about 17 years.

I think the sooner it's cleared the better provided you have a safety-net of some savings elsewhere in case you can't get the money back if you need it and you can still get enjoyment out of life. We could have paid it off faster if we had stopped the children's clubs and holidays etc but we wanted to get a balance.

notcitrus · 02/02/2013 23:29

I'm impressed you're able to pay it off that fast - why did you take out a 30 year loan in the first place if you have the money to pay it back faster? Most standard mortgages are 25 or 20 years.

Go for it, but do keep some savings accessible for emergencies, and maybe balance repaying fast with enjoying life a bit too. But definitely better value than a savings account!

heidihole · 02/02/2013 23:30

Yes, we paid ours off very early. Even with early repayment charges you save MASSES on interest and you get that lovely feeling of house security. well done you.

katolla · 02/02/2013 23:34

Everyone on moneysavingexpert seems to be in favour.. I did my last place in 9 years, traded up and now have 6 years left to go. Since dc1 is due any day, I don think that's going to work out though..

SingingSands · 02/02/2013 23:42

Wow...Really? How?

I'm not great at finances, I just plod along at it, what have I missed? Do you just overpay it every month?

DiscoTent · 02/02/2013 23:42

A lot of mortgage deals only have early redemption penalties for the first 5 or 10 years, I know someone who carried on paying £10 a month towards the end of the term so it took them an extra couple of years to pay off. Even if you do this you save thousands in interest.

We paid off last week, 12 years after taking a 25 year loan. We were fortunate enough to be with Northern Rock who are currently waiving redemption fees for lots of customers.

The benefit of having a longer term than you're going to need is that, if your circumstances change, you can stop overpaying with no problems. We overpaid when we could, but didn't bother when we needed a bit extra.

Jinsei · 02/02/2013 23:45

We are overpaying ours, too. Should be clear in about 5-6 years, if everything goes to plan. If you can do it, why not?! Our mortgage doesn't have any early repayment penalty either.

mercibucket · 02/02/2013 23:46

Go for it
Wrt early repayments, if you do have a charge, just don't pay off the last, small amount
Check you can access the overpayments if you don't have savings tho. A redundancy would leave you stuck if you've put all your savings into the mortgage

mercibucket · 02/02/2013 23:46

Mosman · 02/02/2013 23:54

For the first 5 years we could only over pay by £6,000 in the January and now we can pay as much as we like off.
With regards to redundancy yes I would keep a small amount of cash savings but the financial help you might get doesn't start until they've all gone so there's only really benefit in having a months worth.

Mosman · 02/02/2013 23:54

I'd also have mortgage protection insurance if i had a time machine.

Original poster

AntoinetteCosway · 03/02/2013 07:06

Yes, we took it over 30 years so that if one of us lost our jobs the repayments would still be easily affordable. In the first two years we can only overpay 20% of each payment but after that there's no early repayment charge I think (though I'll check. Unlikely to be over £80k though!).

Ok, I am relieved we don't seem to be missing anything massive!

OP posts:

lightrain · 03/02/2013 07:15

Most people don't overpay because they haven't got spare pots of money sat around! Good for you if ou can - but it's the cheapest loan you can get, so we strike a balance between mortgage, having a reasonable amountt of money for savings/ emergency funds and also having a nice standard of life (the odd holiday, takeaway, etc.). I'd rather have those things than be mortgage free and be living a miserable existence.

fridayschild · 03/02/2013 07:23

We had almost cleared our mortgage on the first house when we decided to move somewhere with better schools. I'd recommend over-paying. It's great for peace of mind if you have a bad feeling about job security, as well as saving thousands on interest. Sadly the better school area came with higher house prices so now I am almost back to square one, and just making small overpayments when I can!

Original poster

AntoinetteCosway · 03/02/2013 07:38

lightrain I meant why don't most people overpay what they can-I realise there's a balance to be struck! But even an extra £5 can take off a few hundred in interest. It's quite incredible playing with the calculators. And terrifying!

OP posts:

Moominsarehippos · 03/02/2013 08:03

Maybe offset? Then the cash is liquid if needed.

lollystix · 03/02/2013 08:09

We did an offset and I wish I'd done it years earlier - paid off half in 4 years. Just make sure you slow down as suggested for the last couple of £000's so you don't get redemption fees. Offset is very motivating not to spend. Go for it

Dededum · 03/02/2013 09:14

Overpaying by £800 a month, which sounds better than it is as 100,000 of mortgage is interest only, but does take us to the equivilEnt of a repayment mortgage plus about £200. My aim is to keep increasing the overpayment....no redemption charges. Have 13 years left but aiming for under 10 years.

CogitoErgoSometimes · 03/02/2013 09:30

I've been paying the mortgage down early. I'm on a fixed rate deal at the moment which involved penalties for early redemption but, every year, I can pay 10% of the balance without penalty. This brings the finishing date forward significantly every time..

Two caveats to paying off early. The practical one is that you should still have some 'liquid' (easy access) cash set aside and not plough every penny into your house. Should you need money in a hurry it's easier and less disruptive to raid a Cash ISA than it is to sell your property. The emotional caveat is that, whilst hard work is commendable, life's also for living and enjoying. So make sure you still work in plenty of treats and holidays and don't make paying off the mortgage the be all and end all.

InMySpareTime · 03/02/2013 16:54

Paying mine off early, should get it finished when eldest DC is 18 (just in time for all disposable income to go on student fees).
Our main barrier to getting it paid off sooner has been having DCs (which cost whatever you have) and house maintenance.
Make sure you have a maintenance fund, in case you need urgent work on e.g. Boiler or roof.
I like seeing our mortgage balance shrinking month by month, makes a change from the start of the mortgage when most of the payment covered the interest.

Scrazy · 03/02/2013 16:58

The other thing to consider is will you need to do any improvements on the property. When the mortgage is paid off the money is gone and you might end up having to mortgage again to keep the house in good order.

Dededum · 03/02/2013 17:04

Because we are overpaying so much they send us a letter every month telling they have reduced our interest payments, so more of the payment is going to capital

BackforGood · 03/02/2013 17:35

I can't understand why you would take out a mortgage over 30 years if it is really realistic to pay it off in 7, but that aside, yes, I've always kept mortgage payments high when the rates are low. When I've had a deal where you can't overpay, then I just have a standing order into a savings account and then pay off a lump sum when we come out of the deal. The figures are incredible of how much you can save with even relatively small overpayments. We're now within sight of the end of our mortgage, and it's a lovely feeling. Once your mortgage is gone it gives you so many more choices.

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