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Original poster

Paying off the Mortgage

3 replies

Creaturecomforts1 · 14/01/2021 16:26

DH and I are in a quandary. We bought a flat in London with the help to buy scheme in 2016.

Flat was 540,000 with a 216,000 ( 40% government loan). Due to life events, we only really started paying for the loan in 2019.
Luckily after 2 years, we've finally cleared the loan, 1 year before it comes due and we need to start paying interest.

The Flat is a 2 bed 2 bath with 277,000 left on the mortgage. We know we want to move to a house at some point. but just don't know if we should push ourselves to try and pay off this mortgage. Partly because we hope to move in 1-2 years anyway.

Does it make sense to try and pay the remainder off, which we think we can do in 2 years
Or save up for our next deposit??

OP posts:

titchy · 14/01/2021 16:31

Look at the relative interest rates. If the rate you get from saving is higher than your mortgage rate then choose that. If it isn't then choose to pay off the mortgage.

Quite simple really!

ElizabethinherGermanGarden · 14/01/2021 16:32

How on earth would you do this? That would suggest you have a joint income from which you could pay out £138k a year on the mortgage and still afford to live in London - that would be over £10k a month! If you can afford this, by all means; it would be an amazing thing to be mortgage-free and £540k would buy you a nice house in most areas away from London - you'd be set and secure for life. It's just not a situation I could ever imagine being in.

Will your mortgage provider set penalties if you overpay?

BarbaraofSeville · 14/01/2021 16:47

Whether you save or pay off the mortgage, the money will be available to go towards your next property anyway as it's normal for the existing equity in your current property to go towards your new one.

Whether you should save or overpay the mortgage would depend on relative interest rates - mortgage rate is likely to be higher, but not guaranteed, there are some very low interest mortgages out there, and any penalties for overpaying. If you are in a fixed deal, it is likely that you can only overpay by 10% per year before having to pay penalties, but check the terms of your mortgage.

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