Pay off mortgage with life savings

[Chompiemompie]

Hi everyone.

We have 7 years left on our mortgage and it's now down to a level matching my life savings.

Given the uncertainty around I am considering using my life savings to pay it off. This would mean I have no nest egg but mortgage free.
DP has no savings to contribute so we would be left with no rainy day funds but mortgage free.

What would you do?

I'd not want to be in a position where I didn't have a rainy day fund.

How much is your monthly mortgage payment?

What interest rate are you paying? Have you got a fixed deal or tracker or similar?

What interest rate are you getting on your savings?

When is your mortgage due to renew?

Hedge your bets? Pay off half. Then top up your investment savings with the mortgage savings.

Me and himself received just enough from various deceased relatives to pay the mortgage off. The best thing we ever did.

If the interest rate on your savings is considerably lower than the interest rate on your mortgage, then it is probably worth considering. How much money are we talking about?

How about speaking to an IFA?

leave yourselves always with enough to cope for 6 months if you lost your income , pay the rest off and reduce your term rather than monthly payments . I can only pay off max 10% a year though or costs interest, so call mortgage company to ask the penalties.
Might be better to save it

Pay off half and save the difference in repayments to build up your savings again.

I was in this position about 2 years ago. I paid my mortgage off and havent regretted. I then put the equivalent mortgage payment into savings each month and with regular savings + putting nearly ever spare penny into the savings account soon got my savings back up again. I've saved a fortune in interest and on months when things looked a bit wobbly, financially, I knew I wouldnt be down to the bone.

It's down to maths.
Can you earn more in interest on your savings than you pay on your mortgage? This has been impossible for many years but may not be now if you have a fixed rate mortgage at under say 2%.

What interest rate are you paying on the mortgage? If fixed, for how long?
Are all your savings cash? I wouldn't be pulling money out of stocks and shares right now.
Can your mortgage account accept overpayments? Often 10% per year is ok. So I'd pay off the 10%, and use it to reduce the term.
I wouldn't clear the mortgage balance unless you have a really high rate.

If you pay it off I am assuming you’ll be in a position to save each month and have a nest egg within a year.

Have a look at an offset mortgage - savings are desperate but it reduces the interest you pay.
Interest Rates will be higher but you can access savings if needed.

Separate not desperate …. 🤣

Can your mortgage account accept overpayments? Often 10% per year is ok. So I'd pay off the 10%, and use it to reduce the term.

Good idea.

We are in the same place and I was thinking to pay off half and keep a smaller mortgage so we still have some rainy day money. It depends on how much it is really, as to if the rainy day fund would still be enough to use if you had any problems arise.

I won't be doing anything until my mortgage is due for renewal though.

I wouldn't wipe out my savings right now.

Is your mortgage rate fixed?

As PP suggested, overpay and clear it a couple of years early instead.

I probably would just pay half it off but you haven't given us enough information to advise whether it's the right thing for you and your partner.

Yes offset mortgages. Your savings are offset against your outstanding mortgage so you only pay interest on the net debt but your savings aren't gone as such.
A financial adviser once told me "never borrow your own money" by which he meant don't borrow on a mortgage if you've got money elsewhere that's earning interest at a lower rate than that which you are paying on the debt.
If not an option I agree with others pay off part of the mortgage but keep some savings.

we paid off the balance of our mortgage late last year when our fixed term was up, it was about £40k, and left us with about £2k in savings. Since then we have paid the amount that would normally be going to the mortgage, about £1k per month in to various savings accounts/ISA, and some shares.

very pleased that we did, considering what is going on at the moment. If you are in secure jobs I would go for it, it won’t take you long to build up your savings again.

Pay it off. With no mortgage presume you can save up again fairly quickly.

Are you in a position to have 4-6m of living expenses and pay off some of the mortgage?

honestly, I currently have no savings, no rainy day fund and it’s fucking terrifying

In these uncertain times, which feel like very rainy days, I'd value ready cash over tying all my money up in my house. You can take comfort from being mortgage neutral while enjoying more flexibility if you don't pay it off.

If I could pay off or buy outright I always would.

A possible compromise is to pay most but not all... say you owe and have savings of £27k then pay off £25k and leave yourself a £2k rainy day emergancy fund.

I’m in a similar position, so this post has been really useful as did not know about the saving if offsetting the mortgage. Thank you to those of have suggested. Our mortgage is up for renewal in 2years and we were thinking of paying it off then depending on then and paying the 10% off each year up to that point. I guess you have to think if you will have an early repayment charge aw well.

Definitely not enough detail for anyone to give sound advice.