Should I almost pay my mortgage off?

Hi all,

I have 180k left on my mortgage and my house is worth 280k. 

We have just come in to some money from a family bereavement and it’s 150k. 

I have been thinking of remortgaging and taking my mortgage right down to 30k, but I’m after some advice on options please?

I have been thinking of doing an interest only mortgage and saving wages to pay it off quicker?

any advice would be greatly appreciated. 

Regards 

Comments

  • tacpot12
    tacpot12 Posts: 7,836
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    You should check whether you have any early repayment charges on your mortgage, but if you don't (and even if you do and the charges are low), you should pay off your mortgage. You can then ask your lender to keep your repayments at the same level as before (which you know you can afford) and to reduce the term of the mortgage. Interest-only won't help pay it off any quicker. 

    If you don't have any emergency savings, I would recommend keeping a couple of thousand pounds (and may be a little more) back from the repayment to that you have an emergency fund in case the boiler or the car breaks down. Keeping back a little more for a holiday will help you feel better about using most of the money to pay off your mortgage. You will save a lot of interest by paying your mortgage off as quickly as you can. 
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • Hi,

    We do have an early redemption penalty of 5k attached to our mortgage, so not sure if we should take the hit on that as we still have 18 months at our current rate before being able to remortgage.

    We do have emergency savings also, so that's kept separate.


  • tacpot12
    tacpot12 Posts: 7,836
    First Anniversary Name Dropper First Post
    Forumite
    It would be worth checking what the Early Repayment Charge (ERC) would be if you paid off £150k.

    Your other option is to save the £150k until you can clear the mortagage without an ERC. Over the next 18 months, you will repay some capital (a look at your last year's mortgage statement will give you a rough idea of how much you will repay per year. You will repay more than 1.5 * what you pay last year over the next 18 months), and you should be able to get about £6000 of interest on the £150k without taking any risk (but you should split the money etween two seperate banks).

    I would do some calculations to see how close you are to being able to repay the mortgage in full in 18months time. If you are a little way off, you might be better on a standard variable rate if this doesn't have an ERC - so wait till you switch onto your lenders SVR, then pay off the £150k, and ask them to recalculate your mortgage term keeping your payments the same (or increase them as much as you are able to do safely to minimise the  time you are exposed to rate rises.) 
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
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