Advice for clearing £99,000 mortgage in next 5 years

LewisTaylor

Hi all, I know there have been countless threads looking for advice around clearing a mortgage, but I couldn’t find one which quite answers the questions I have, so here goes:

 

I’m looking for advice on how to plan to efficiently pay off a mortgage in the next 5 years. My wife and I are due to re-mortgage our deal in August 2024. By that point we will have around £99,000 left to pay on a house valued at approx. £280,000, and ’14 years left’ to pay. Currently we pay around £800p/m (2.9%) and overpay £800p/m. Ideally, we would like to be mortgage free in the next 5 years, and could afford to overpay by £1,100 - £1,200 p/m right now.

Currently my thinking is this:

Re-mortgage in August 2024 at c.4.5% paying £800 p/m, taking a term of 14 years, fixing for 2. Overpay by £800 (so as not to go over the 10% overpayment limit), save an extra £300 p/m into a savings account (£7,200 over 2 years).

Re-mortgage in August 2026 (will owe c.£74,000 after overpayments, adding in the £7,200 from savings, reducing the amount to c. £66,800). Take the term for 12 years, fixing for 2, assuming we will pay around £600 p/m. Overpay by £550 p/m (so as not to go over the 10% overpayment limit), saving an extra £850 p/m into savings (£20,400 over 2 years).

This would leave around c. £44,000 left on the mortgage in August 2028, minus the £20,400 in savings would leave c. £23,600 on the mortgage.

What is the best way of clearing this final sum? Is it to simply take a 2 year fix on the remaining balance and overpay to the 10% limit until clear? I’ve heard most lenders won’t be interested in offering mortgages for such a low amount, or at least, not at a competitive rate – is this true?

Or is there a better, more cost-effective way of clearing £99,000 in the next 5 years? Is it ever more cost effective to overpay by more than 10% annually and incur the fees?

I appreciate there is probably no straightforward answer to this, but would welcome any advice J

Many thanks in advance!

Cairnpapple

When we did similar we just went to SVR for the final year and threw all our money at it,  but that was less painful when SVR was 3.49%!

We also decreased the term at each remortgage so that more of what we were paying was 'payment' rather than 'overpayment'.

El_Torro

One option would be to get a 5 year deal in August 2024 and then you know you will clear your mortgage within 5 years. Of course this may or may not be a better deal than going with 2 year deals. We don't know what mortgage offers will be like (including the upfront fee) in 2 or more years time. However with that much of the repayments being capital does it really matter that much if you're not getting the most optimal interest rate?

How low a mortgage you can get depends on which lender you ask. Some will go as low as £20k, though that might significantly limit your options (in terms of which lender to go with). In 2 or 4 years time that figure might be higher than it is now. 

There probably are scenarios where it makes sense to pay the early repayment charge on large overpayments. I would try to avoid falling into this though.

Archerychick

Or you could leave the final £20,400 in the savings account, take a 2 year fix for the £44k.

or go onto SVR

truth be told that’s a few years off yet, so it’s very hard to know for sure which will be your best option, but I think you’ll have options 

Archerychick

You could also look to a lender who doesn’t restrict you to 10% overpayment - first direct have no limit and there is another lender who has 20% (can’t remember who it is). That said, you may be better off putting money into a savings account anyway depending on the interest rates 

LadyWithAPlan

This spreadsheet  below is fantastic for adding in regular and odd overpayments - and it might inspire you to see where you can find extra cash by selling stuff eg vinted or spending less to get this mortgage gone

YNAB is a game changer for tighter budgeter if you want to get v serious about pay down - its your choice how tight you want to cut your budget to op more  - certainly where your savings rate is higher than the mortgae do that - but be aware of any taxable income on your interest

I think you cant plan too far in advance strictly as your income will no doubt change, Cost of living will, circumstances and your monthly budget spends.

https://www.locostfireblade.co.uk/spreadsheet/Index.html