Repayment mortgages

[CookieDoughKid]

We have a £220K repayment mortgage on a 17 year term and our mortgage is about £1100 a month. Our house is worth about £400K. Our mortgage payment is nearly 40% of our total income after tax and although its affordable, it's still a stretch for us since we have so many outgoings include debt repayments.

Hubby really wants us to switch to interest only so we can have an easier lifestyle but I refuse to as I fear that if we switch we will never switch back. We were on interest only previously for 5 years and the only reason we came off it was because we sold and bought a cheaper house and we could afford to go to repayment.

I know it's a stretch but if we really put our minds to it, we could probably afford to pay it off even quicker. At the current rate however, dh will be 57 and myself 55 once mortgage paid off. We live near Oxford and believe me, a £400Khouse is a modest sum round here for a family home. Please, if you have paid off your mortgage or as close to it, tell me that the sacrifice has been worth it?

I'm not convinced we will find work in our 50s and 60s as easily as we do now. And when we are in 50s and 60s, wouldn't we want to slow down a bit without the pressure anyway? Tell me. Especially if you are in this age group, and you still work but because you have to work - don't you worry? Do you wish that you should have worked harder in paying off the mortgage when you were younger? Or if you have paid off, has it been worth it?

Or should I relax a bit more like dh says??Dh says we could be hit by the bus tomorrow.

I think you are completely sensible OP, realistically you need to pay off the capital as well as the interest and unless you have a clear plan for how you would do that in 17 years time, you need to be paying it now. I know 40% of your income is a fair amount but its not huge in the scheme of things. Is there any way you could increase your monthly income, even by a small amount, to leave more money for other things? I am still in the mortgage-paying phase of my life but I definitely don't want to end up having to work as much as I do now when I'm in later life, just to be able to make mortgage repayments. I suppose its getting a balance of living for now but also taking care of your future.

Interest only mortgages are becoming harder and harder to get now anyway. The lender would want to see how you will pay the capital at the end, most now won't take sale of mortgaged property as a repayment vehicle and want an investment or pension pot as proof.

Am aiming to be mortgage free by 50 and reduce my working hours. I'd still like to work part time and am in an industry where it's common to do so, but I want to have more time for myself. I think you are being sensible.

I cleared my mortgage at 52 it was bloody hard work I always paid more than I had to and prioritised repayments over holidays, cars, etc. One thing I did do was every January make a lower payment, sometimes interest only so I could clear the Christmas credit card I now work part time, do lots of yoga and gardening.

A friend of mine has just got a mortgage for 28 years to the age of 75!!!!!! Incredible. My dad is 78 and he has serious heart and dementia issues - does the government and banks really think the next generation will be fit enough to work to 75!!

Your DH is being stupid (sorry).
You need to pay off your capital.
We are in the same kind of situation as you - however we overpay every month too with a view to paying off the mortgage in our 50s (we are early 30s). You don't want to be stuck with a mortgage into your 60s, fuck that!
You would be taking a backward step taking out an interest only mortgage.
Have you looked into re-mortgaging with another lender or getting a new product as interest rates are ridiculously low at the moment.

Ah thank you for your replies! Making me feel a bit better already. I know in my head we are doing the right thing. I know the workforce is living longer but quite frankly I'm scared of all this ageism about. I don't see men and women in their 70s (well NONE and certainly NO women in their 60s) in the IT industry that we work in. We are a youth orientated industry and I'm sure ageism is rife even though no one speaks about it.

We will just have to keep our heads down and keep making those mortgage payments for an easier life later on!!

You could approach your lender in regards to having the term extended (paying longer but less monthly) bit you will pay more interest in the long run.

You'd be very unlikely to get an interest only mortgage on a residential property nowadays

What interest rate are you paying???

You'd struggle to get an interest only at the moment.

If you're doing ok as you are and don't have any big events to save for, aren't about to enter a period of lower earnings, I'd keep going if I were you.

We don't have a mortgage these days and my DH thinks we should buy a bigger house and get a new mortgage. I'm not keen, your thread has strengthened my resolve to resist.

Best of luck to you op

GreenSand We are paying 2% interest rates but on a £200K mortgage, not £220K (just got corrected by my DH). Even better! But still, painful!! My worry is if we ever go to interest rates above 5%. Hopefully, that won't happen in the short term but I'm sure a lot of homeowners who bought in the last few years like me won't have really taken high interest rates into account as we've never experienced it.

We witched to repayment once we saw the endowments weren't going to cover it. It hurts, but is worth it. We are now in the minuscule interest, wiping off loads of capital stage, and I plan to overpay by £10k per year, so we finish it early.

That's a pretty low rate. Stick with it as long as you possibly can!!
Does DH realise that if you go interest only, you are going to have to have a savings vehicle to pay off the capital??
How long til the other debt is cleared? Can you focus on getting that cleared in order to free up a bit more cash?
Assuming it's on a much higher interest rate, with a shorter term that might be a better long term solution. I've seen suggested on MN find the debt with the highest interest rate, and pile any extra cash into that debt, and get rid. Then start on the next highest interest rate. Might that be possible?

Left field (possibly irresponsible option).

Why don't you compromise- keep a repayment mortgage but extend the term so you are committed to lower monthly payments. Then overpay to at least the level you're paying currently, if not more.

If you needed to or wanted to pay less in a particular month (holiday, Christmas, etc), you'd just pay the lower monthly commitment with no overpayment. So you could still make progress with the mortgage but have flexibility to occasionally prioritise lifestyle.

This obviously only works if you are both committed to the overpayments most of the time. If you're not disciplined, it's a very bad idea.

Stick with what you are doing.
It's a wonderful feeling once you've paid it off, to then have a choice over how long you want to work for, or if you want to go PT, or if you want to help your dc or if you want to do the fancy holidays or spend on something else that 's a 'treat' rather than 'sensible, but you do it once you own your home, not before.
Even if the B Soc would let you, the only reason sensibly to go interest only would be if it were a fixed term - perhaps a maternity leave or a year's study to improve your qualifications and therefore future pay. Certainly not just randomly to spend more on stuff now.
I'd want to get as much as I could paid off n ow whilst interest rates are so low - who knows what will happen in 5 or 10 years time.

I'm on the fence. We have an interest only mortgage but pay off chunks each year so we do reduce the capital. However, we have about 70% capital in our house and we are completely indifferent as to whether we eventually clear it or not. If we don't, we will sell up and downsize. Our theory is that the capital is going to increase so much over the next 20 years that the mortgage itself is relatively insignificant.

Just a quick update. After much discussion persuasion we decided to keep our repayment mortgage as it is. Although it is a stretch for us, we can make do on a day to day basis and we're happy to forgo luxury holidays etc..if it means we can secure our home and not struggle in our 50s/60s. I agree with suit that over the next 10 to 20 years, the value of our house will increase and we can always downsize. However, it would be nice to not have to pay back a chunk of mortgage if we did downsize and give some money to our children for their house deposits. I think the next gen are really going to need all the help they can get! Thanks for your input mumsnetters.