Repaying Mortgage Early

gfriel2104

Hi folks,
Myself and my girlfriend mortgaged our house last year. This is our first mortgage. At the time, we bought the house when I was a student earning £700. Things have changed and I now earn quite a bit more.
Originally we were planning on upping the payments by the 10% allowed each month to clear off our mortgage earlier, but upon looking at how much we are currently able to save, we might be able to do this significantly earlier.
However, as the house will still have about 15 years left on the mortgage by the time we could pay it off, I expect we'll be looking at some massive penalties if he were to do so.

I can only find monthly overpayment penalties on my documentation, but if for example tomorrow I was to pay off a the mortgage in full on a house that had 15 years remaining, does anyone have any idea what kind of penalties (or the algorithm) that would endure? I'm obviously going to check with the bank properly but just while I have a few mins free I thought I'd ask for advice/experiences here.

MovingForwards

It will be in the mortgage offer and T&C's you received, generally it will be the early repayment charges and a couple of hundred to release the mortgage charge from the property.

It tends to be 10% per year where no additional costs are incurred.

How long until your fixed period is up? When that's up there's usually unlimited overpayments but to clear it still requires the couple of hundred to release the mortgage charge from the property.

gfriel2104

MovingForwards said:

It will be in the mortgage offer and T&C's you received, generally it will be the early repayment charges and a couple of hundred to release the mortgage charge from the property.

It tends to be 10% per year where no additional costs are incurred.

How long until your fixed period is up? When that's up there's usually unlimited overpayments but to clear it still requires the couple of hundred to release the mortgage charge from the property.

Thanks for replying.

The fixed rate is 5 years long, so roughly 4 years to go. I'll have to review the mortgage terms to see if that is the case, but if there are unlimited repayments after the fixed rate that might actually be the perfect goal.

So from your understanding, if I have say £30,000 to repay at the end of the 5 years fixed, I should be able to repay this in full without the early repayment charges and I would only incur a couple of hundred early release charges?

Again, thanks for your reply that was really helpful. 

MovingForwards

@gfriel2104

Your perfect goal is the way I would do it. But you need to work out how much interest you would pay due to waiting compared to how much the ERCs are.

That is my understanding, but again your mortgage T&C's will confirm.

Are you also working on your emergency fund and pensions? Having a good amount paid into pensions now, makes it a lot easier to built up retirement funds and have a good retirement 😊

penners324

Your far better off throughing a big portion of your money left over into a pension pot and have an emergency fund (2 to 6 months worth) available.

Thrugelmir

penners324 said:

Your far better off throughing a big portion of your money left over into a pension pot and have an emergency fund (2 to 6 months worth) available.

At the current time that's subject to job security and stability of pay. Investing in markets may not be optimal at the current time. 

Jack_Cork

I paid off my mortgage last year rather than putting the money into my pension (paid off £24k), and with all that is going on its nice to know its paid off and I have a roof over my head whatever happens