Mortgage Payment Period

Catherine8179

Hi, I am new here, but hoping for some advice from you helpful people -

We have an interest only mortgage, at a low rate at the moment, on a house worth 5 times the mortgage value - but with 12 years to go I don't think we will pay off the capital at our current rate of going.

The mortgage suited us when we got it, but since then kids have come along & I have stopped working, it's got more difficult to make payments on the capital - although I will be going back to work next year.

What are our options in this current environment?

Thanking you in advance for reading this & hopefully giving me some piece of mind.

Thrugelmir

Pay off what you able to.

As the end of the mortgage term draws closer consider extending the term of the mortgage.

DVardysShadow

Catherine8179 wrote: »

... The mortgage suited us when we got it, but since then kids have come along & I have stopped working, it's got more difficult to make payments on the capital - although I will be going back to work next year.

What are our options in this current environment?

As Thrug says, pay off what you are able to. Things may be tight, but do make the effort to pay something above minimum, even now, while you are not at work. Perhaps when you go back to work, you could look at a mortgage calculator, decide how long you are prepared to go beyond the final 12 years and work out what your monthly payment should be. And pay that amount.

Actually, look at a mortgage calculator now and see how things might pan out. You have 12 years to go. It is not a bad time to look at this issue. Better now than 2 years before the term is up.

Catherine8179

Thanks to you both for your comments.

property.advert

You need to look at the bigger picture, which primarily includes your pension provision.

Why ? because you repay your mortgage out of taxed income but you can invest in a pension gross, that is before tax is taken off. Now if one of you were to be paying tax at 40%, then paying £60 off your mortgage would actually cost £100 because the taxman would take the other £40. However, that whole £100 could be invested in a pension. In fact, with salary sacrifice, you may be able to invest £100 in a pension for a cost of around only £87 if your employer pays the National Insurance element into your pension as well.

Of course, you cannot get all this money out of your pension but you can get back 25% at age 55 or over and then drawdown some in year 1 which may boost that to near 30% of your fund, which has grown over time, tax free. In contrast, your mortgage balance is eroded by inflation, though you do have to keep paying the interest.

It is not a straightforward call. You need to examine your situation carefully and understand it all in unison as no one part can be treated in isolation. The answer for you may well be to pay down the mortgage but it might equally not be the correct thing to do.