Need advice - possible to pay a 20 year mortgage in 6 years?

getmore4less

You need to tighten up your number crunching at the moment you are way off the bold statement

We would then repeat this until each one of us owns a property outright, so it would take approximately 15 years to own 3 proprieties, instead of a lifetime..

look at the mortgage....
normal payment
£80k @ 2.5% 20 years £424pm interest £21,750

+ £7kpy or £583pm

£80k @ 2.5% £1005pm 88 months 7 years 4 months interest £7,563

Repeat 3 times 21 years to own 3 houses

Is it achievable to pay down this mortgage in 6 or 7 years instead of 20?

This is the reason why I'm asking if it's possible to pay off a 20 year mortgage deal in just 5 years.

The more you throw at it the quicker it gets paid off

£80k @ 2.5%
£1,040pm 7y interest £7,287
£1,198pm 6y interest £6,233
£1,420pm 5y interest £5,187
£1,753pm 4y interest £4,150
...

It will be easy to avoid any ERC by picking the right products.

We agreed that if each one of us puts £200 for 72 months (6 years) via a standing order into a shared account that we own, in 6 years we would have something like £45k.

I think my best option is what you mentioned.. maybe go for a 5-year fixed mortgage.
This would keep my repayments down for this period allowing me to save even more money.
At the end of the fixed period, I would just pay a lump sum of £45k that we saved throughout the 5 years without having to pay ERCs.

At 5 years with 3*£200pm you will have £37k not £45k that takes 6 years

The real reason why my siblings are involved is because we intend to own 3 rental properties (one for each) in 15 to 18 years maximum.
We agreed that if each one of us puts £200 for 72 months (6 years) via a standing order into a shared account that we own, in 6 years we would have something like £45k.
This amount can then be used to pay off the debt straight away.. That's why I'm only going for a £80k mortgage max.
We would then repeat this until each one of us owns a property outright, so it would take approximately 15 years to own 3 proprieties, instead of a lifetime..

I think you need a rethink on your times scales or the amounts you are putting to this project that keep getting shorter.

to get 3*£100k properties wth £20k deposits 3*£200pm won't get you close to 15years.

To do it 3 times 5 years each with £600pm from the pool you need to be paying a regular mortgage payment of around £800-£850pm not £425.

To hit the 15year target you need closer to £500pm each(that includes the normal mortgage payment) to cover the mortgages and that still requires another £40k(£220pm) from somewhere for the other 2 £20k deposits

even if we keep it simple and ignore interest/costs and just the capital to be coverd over 15years ((3*£80k)/(15*12))/3 = £296pm

You could work with £300pm each and the owner of each house pays all the costs(interest, fees etc).

Nebulous2

I'm not sure what benefit you see from pooling your resources, that you couldn't do separately. It would be much less complicated, less room for falling out, and less likely to cause family problems if one or the other of you forms a relationship, has children, decides to opt out and go tour India, becomes ill and cant work or loses their job.

If you buy a house and pay it off as quickly as you can, with lodgers overtime etc, your 15 year timescale may well be possible. Your siblings could do the same if they are so inclined, which would give them the utility of a house for the full 15-18 years, instead of one of them having to wait 12 years before they start to use / pay for their one.

You'd also be less hostage to the vagaries of economic circumstances. How would you compensate for inflation? With 3-4% house inflation you could end up paying considerably more for a similar house in 6 and then 12 years. Your payments to them might need to be 2-3 times what you receive from them. If interest rates rise considerably within 12 years the third house might take 10 years to pay and cost more than the dream house you are referring to as a longer term goal does now.

getmore4less

Also forgot....

They need to raise another 3 deposits for the new places.
Dream home probably means a fair bit more than these £100k starter/rentals.


got the deposit saving wrong in the previous post I counted over 15 years should have been 10y that £220pm becomes £330pm

I would estimate that a min of £500pm each to get the 15year plan in place and closer to £1kpm to be able to buy the second places.

dimbo61

Look at offset mortgages with Yorkshire building society.
Your sister and brother can pay into separate savings accounts offsetting your mortgage.
This way They are building up a deposit to buy a property of there own when the time comes.

SandraX

Dear OP

Very sensible and admiral post. Check if you are paying extra and its counting as others said - then do your level best to bring it down asap as then you wont have to worry about interest rats doubling in 5 years or you not having the income you have now for any reason
10/10 to you

Unicorn_cottage

First Direct offer unlimited overpayments but I am not sure of their lending criteria. If you got a mortgage like this you would still need to be aware of paying off the mortgage early, within the timeframe of the deal you have chosen, as there will be a financial cost to this.

Why is the lump sum coming at the end of each year?

Have you done the maths on renting out the property/properties? Will it bring in the income you are assuming?

ViolaLass

SandraX wrote: »

... do your level best to bring it down asap as then you wont have to worry about interest rats doubling in 5 years or you not having the income you have now for any reason
10/10 to you

But they will still be at risk since they intend to get involved in at least two other mortgages at the end of their own.