Technical mortgage question

[theAntsareMyFriends]

We've been over paying our mortgage as much as possible for years (reducing the term) and fix for as long as possible too and I'm wondering can we overpay if it will bring the term shorter than the fix.

Eg. rough number are that we have 3 years left on our 5-year fix and 30k left on our mortgage. We can overpay 15k each year so if we do the full overpayment it will reduce the term to 2 years and so shorter than the fix. We don't want to have the pay any early redemptions charges.

I'm trying to work out the options:

1. continue overpaying the max and then have a year or so when we are still in our 5 year fixed mortgage deal but our mortgage balance is 0 - is this allowed and will it incur a charge?
2. pay overpayments until our term is reduced to the same amount as our 5 year fix and then stop
3. as above but continue overpayments reducing the monthly amounts instead of the term

Hopefully this makes sense. Any advice from mortgage experts out there or anyone who has been in the same position would be greatly appreciated.

I think you will be charged a redemption fee if you clear your mortgage within a fixed rate period. Also, some lenders won’t allow you to pay more than a certain percentage over your balance during a fixed rate period
without incurring an ERC.

yes as above has said. At this point I would say it’s better to invest in a S&S ISA if you haven’t reached your limit. It will likely do better than your mortgage rate in terms of return over the next 3-5 years and helps bed in good habits of investing once you’re mortgage free rather than fritter away the extra. (Admittedly this is making a big assumption that you haven’t made plans for the extra money once you have finished paying your mortgage).

editing to add maybe more for others since you can’t go back in time. This is my experience of the use case for offset mortgages. We technically have zero mortgage as we have the mortgage balance sat in the offset so every month we pay the mortgage out of the offset IYSWIM

Thank you. Very helpful.

Our mortgage allows us to pay 10% of original amount without ERP so that's fine but good to know I can't clear it within the fix without a redemption fee. I hadn't heard about those. I'll have to do a bit of research.

We do have s&s ISAs which do ok but only about the same as our mortgage as our interest rate is quite high (4%) as we had to refix when they had all gone up. I'm glad we did as the rate hasn't come down much below that yet and did go up so overall we have benefited from the fix.

I did look into offset mortgages and we didn't expect to be able to overpay as much as we have so I think when I based my research on them it was without overpayments and it didn't seem like such a good option for us.

When we have paid off the mortgage we are planning to put as much aside for our children's education as possible and will get a but more into investing for retirement. I also want a pony but that's probably not a sensible investment!

Check your T&C's but usually an ERC is 3% in year 3, 2% in year 2 and 1% in year 1.
2% of £20k is £400 so it might just be worth paying to be mortgage free.

Alternatively, as above, if your mortgage is due to be paid off in full at the end of your fix, I'd just make the standard payments and put whatever you have for overpayments into an ISA.

If your S&S ISA is actually getting 4% something feels a bit off. Maybe double check and if it really is as low as that look at the funds it’s in. You should have got a much better return over the last year