Paying off mortgage

LightFlare

We are hoping to be in the position to pay off our remaining mortgage in the next 3 or 4 months.

Our current 10year deal is set to expire in September.

Is there a procedure to go through ?

Do we need to make an appointment with the mortgage person at the bank to officially inform them of our intent ?

Is there a recommended time limit/scale for these things to take ?

Any answers gratefullly received as we are clueless having never been in this position

Thanks

On-the-coast

What’s the actual term of the mortgage? A 10 year (or 2,3,5 etc) fixed rate deal doesn’t mean the term expires at end of deal, just that you go to SVR

what are the penalties for paying early?
how much can you overpay per year (often 10%)

if I were you (and I was once… :-) ) in a few months I’d pay the max I could without penalty - then I’d wait for SVR to kick in in Sept.  I’d then pay most of the rest off, then talk to my BS/bank about how to close out the rest. 

Exodi

As above, it depends if you're in a fixed term (and more specifically if you are, what the overpayment allowance is and any penalty details).

Typically it's 10% of the original mortgage balance, but if you had received a significant windfall (e.g. inheritance) then it's quite common that this would be more than the overpayment allowance. You can work around this by contributing the maximum your overpayment allowance allows each year until the mortgage is paid off or the fixed term expires (whichever happens sooner).

As a numbers guy myself, I have to mention alternate possibilities. For example, Do you have an emergency fund? This should probably be considered before all else. What is pension situation? This is oftentimes the most efficient use of spare cash. What is your mortgage rate? If you have a mortgage where you're paying 2% interest, while there are savings accounts available where you can earn 5% interest on the same money, it doesn't make much sense to overpay it instead of putting the money in a higher interest savings account (at least not yet). Similarly if you're open to investing and believe investment returns will be higher than your mortgage rate (which many do), it might not make any sense to overpay, and instead invest any spare cash instead. 

Obviously disregarding the numbers side, I appreciate that there is an emotional aspect to being mortgage free - a feeling of security and freedom that you can't place a value on.

All food for thought.

EDIT: sorry I see in your OP you mentioned you are in a fixed term until September - you could either make an overpayment now up to you overpayment allowance (check with the bank to see how much this would be, though some show it on the app) and then don't switch deal so you fall onto SMR in September and pay the rest off in one lump sum.

Unfortunately no champagne or party poppers, quite anti-climatic. They'll send a statement and organise removal of the charge shortly after.

LightFlare

On-the-coast said:

What’s the actual term of the mortgage? A 10 year (or 2,3,5 etc) fixed rate deal doesn’t mean the term expires at end of deal, just that you go to SVR

what are the penalties for paying early?
how much can you overpay per year (often 10%)

if I were you (and I was once… :-) ) in a few months I’d pay the max I could without penalty - then I’d wait for SVR to kick in in Sept.  I’d then pay most of the rest off, then talk to my BS/bank about how to close out the rest. 

was initially a 17 year and fixed rate for 10 years -- 7 years left to run come September

Currently overpaying by ~15% a month and have been for the last 4 years

Not sure about the penalty - but i think it was something like 3 months interest - we will actually be in the position to pay off end June. but when i worked it out, the figures were almost identical based on paying interest for the 3 months or paying the penalty

Bit in bold - very similar to our thought

Thanks for the info/response

LightFlare

Exodi said:

As above, it depends if you're in a fixed term (and more specifically if you are, what the overpayment allowance is and any penalty details).

Typically it's 10% of the original mortgage balance, but if you had received a significant windfall (e.g. inheritance) then it's quite common that this would be more than the overpayment allowance. You can work around this by contributing the maximum your overpayment allowance allows each year until the mortgage is paid off or the fixed term expires (whichever happens sooner).

As a numbers guy myself, I have to mention alternate possibilities. For example, Do you have an emergency fund? This should probably be considered before all else. What is pension situation?

Both taking retirement imminently - hence the ability to pay off the mortgage with partial lump sums

This is oftentimes the most efficient use of spare cash. What is your mortgage rate? If you have a mortgage where you're paying 2% interest, while there are savings accounts available where you can earn 5% interest on the same money, it doesn't make much sense to overpay it instead of putting the money in a higher interest savings account (at least not yet).

Current fixed rate is 3.5% but this ends in Sept - SVR would probably be similar to what we could achieve in a good savings/investment.
Balance will be ~60k

Similarly if you're open to investing and believe investment returns will be higher than your mortgage rate (which many do), it might not make any sense to overpay, and instead invest any spare cash instead. 

Obviously disregarding the numbers side, I appreciate that there is an emotional aspect to being mortgage free - a feeling of security and freedom that you can't place a value on.

All food for thought.

EDIT: sorry I see in your OP you mentioned you are in a fixed term until September - you could either make an overpayment now up to you overpayment allowance (check with the bank to see how much this would be, though some show it on the app) and then don't switch deal so you fall onto SMR in September and pay the rest off in one lump sum.

Unfortunately no champagne or party poppers, quite anti-climatic. They'll send a statement and organise removal of the charge shortly after.

Shame - was hoping for at least a mini-fanfare

Some responses in bold -- thanks for the informative response

badmemory

Fanfare available on mortgage free wannabees!

saajan_12

LightFlare said:

On-the-coast said:

What’s the actual term of the mortgage? A 10 year (or 2,3,5 etc) fixed rate deal doesn’t mean the term expires at end of deal, just that you go to SVR

what are the penalties for paying early?
how much can you overpay per year (often 10%)

if I were you (and I was once… :-) ) in a few months I’d pay the max I could without penalty - then I’d wait for SVR to kick in in Sept.  I’d then pay most of the rest off, then talk to my BS/bank about how to close out the rest. 

was initially a 17 year and fixed rate for 10 years -- 7 years left to run come September

Currently overpaying by ~15% a month and have been for the last 4 years

Not sure about the penalty - but i think it was something like 3 months interest - we will actually be in the position to pay off end June. but when i worked it out, the figures were almost identical based on paying interest for the 3 months or paying the penalty

Well the thing with a penalty is its just lost. Whereas if you don't pay off in June and keep the money in a high interest savings account, the interest earned will largely offset the interest cost. Whereas if you do pay off, you just lose the penalty. 

flaneurs_lobster

In my youth (some decades ago), after a particularly good bonus season, I walked into my branch of RBS and asked to clear my mortgage with my debit card.

It had to be explained to me, gently, that it wasn't quite that simple......

LightFlare

Just to resurrect this thread.

Hoping to repay this early next week.

Are physical deeds etc still typically kept by the building society/bank or is it all electronic nowadays ?

user1977

LightFlare said:

Are physical deeds etc still typically kept by the building society/bank or is it all electronic nowadays ?

Depends on which era you took out the mortgage, which nation the property is in, etc. If it's a registered title then unlikely the lender will be holding anything of particular value anyway.

MWT

It can be surprising what they are still holding sometimes.

Our mortgage was taken out in 1993 and ended in 2018, the pack of papers they were holding and sent to us was about 3" thick and covered everything back to the original land transfers about 10 years earlier than our purchase when the house was first built.

These days I doubt they are holding anything at all....