I'm currently nearing the end of the first year of my new 25-year mortgage, which is a five-year fixed plan at 3.39%. As it stands, I can make overpayments of up to 10% of the original loan every year without incurring an early repayment charge. I have just done this, and consequently reduced my mortgage term by almost 4 years and saved about £14,000 in interest. (Hooray!)
The original plan was to overpay within the limits (i.e. without incurring ERC) and be done with the mortgage within about 8 years. However, having done some calculations and discussing it with my accountant, I could safely overpay even more each year (the early repayment charge is 4%, so at most another £200 on top of an additional £5,000 overpayment) and be done with my mortgage in as little as 3 years.
I'm fortunate to be in a position where I could do this and still have a decent rainy-day / all-my-work-disappears-and-I'm-unemployed-for-a-year fund, so I won't be digging a financial hole for myself. However, I'm wondering if there are any definite adverse consequences to doing this. For example, If I completely paid off my mortgage by 2018, and then in 2022 decided I wanted to buy a much bigger house, would I struggle to get a mortgage because I hadn't had any kind of credit for the intervening 4 years?
For reference: the mortgage is my only current debt; I have no credit cards or other loans. I'm little concerned that having zero visible debt would be seen as a bad thing.