First time buyer - possible windfall coming in first year of mortgage that could clear its balance

malcolmK

Hello,

Just looking for people's experiences on paying off mortgages very early.

We are currently looking at buying a house. We are first time buyers and have lifetime ISAs that are going to be used to help with the purchase but will need a mortgage to go with this. However, there is a fairly strong chance that in the next few months we will be coming into some money that would more than cover the mortgage balance.

My question is, has anyone had any experience of paying off a mortgage in its first year or so and had any issues with doing this? I know that there can be early redemption fees on some mortgages but there seems to be others (the non fixed ones especially) that don't.

Thanks in advance.

pjcox2005

You can select a mortgage product that doesn't have an early repayment charge or just do a two year fixed and then repay at the end of the period when you remortgage. Both are unlikely to be an issue in that the cost of not repaying it straight after the inheritance would be relatively low.

You can't put life on hold but there is a question that if you are fairly confident that size of inheritance is coming shortly then is it worth buying now if you then think you'll buy a larger property subsequently. Are you better delaying any purchase, getting inheritance to allow for a bigger first time purchase saving stamp duty and legal fees by only buying once. I'd seriously consider it if you think you may move within a year or even two of purchase.

ACG

You could also look at an offset mortgage. 

Brie

Precisely the reason we got an offset mortgage.  I knew there were going to be a number of chunks of money coming to us over a certain amount of time.  We didn't pay things off (chunks not big enough) but it allowed us some flexibility.

K_S

@malcolmk You could go for one of the following options -

- a 2 year fix and pay it off at the end of the fix

- a 2-year no-ERC tracker/discount product and pay it off fully when the funds come in

- an offset product as described above if you're ok with the premium on the interest rate in the interim period

Which one may be best suited for you will depend on your personal preferences and how quickly you think it is that the funds will be with you.

pjcox2005

Sorry to also add, consider whether paying off a mortgage is the best option. Mortgage interest rates are currently low, so even if this is a forever house then perhaps you'd be better off with a pension for the additional tax savings and potential return on investing. Just think through all options is all I'd say.

malcolmK

Thank you all for the helpful replies.

A few things for me to consider but hopefully nothing too troublesome.