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Original poster

Pay off mortgage with life savings

164 replies

Chompiemompie · 01/10/2022 16:28

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?

OP posts:
BorgQueen · 01/10/2022 17:30

Can I ask why you didn’t fix at around 1% a year ago? Were you already on a fixed rate?

I thought that rates were going to rise so I fixed last November for 5 years, which will leave us about £8k to pay off.
My DD was already on a 2 year fix, she ignored my advice to go for 5 years and I’m biting my tongue now.

CirreltheSquirrel · 01/10/2022 17:32

I'm in a similar position and I'm waiting until my current deal ends before doing anything other than the £70 per month overpayment I set up a couple of years ago. When my fix expires I will have 3 years to go and enough savings to give me options depending what rates and my employment situation look like at the time. For now I can earn more interest in a savings account.

OhFrogOff · 01/10/2022 17:33

DO you have income protection, a good sick leave policy or death in service payments for you both?

Personally I wouldn't do it, because you simply do not know what is around the corner.

I was diagnosed with a life changing condition - made redundant rather than the org paying out the four years of salary they were supposed too.

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General money
mathanxiety · 01/10/2022 17:34

If you pay it off, will the total amount paid over the life of the mortgage end up being more than the house is worth?

Is your life savings equal to 10-15% of the value of the house?

All analysts are predicting a UK housing bubble crash in the next year., with up to 20% wiped off the value of property. This is thanks to the crisis sparked by the Chancellor's rece t mini budget and ongoing refusal by the government to address financial market horror at what is going on.

If you pay off the mortgage and end up with no rainy day fund you are basically assuming all the risk of the I vestments in the property yourself. If you keep on paying monthly the risk in the market is shared by you and your lender.

happy66 · 01/10/2022 17:36

Pay it off

RoachTheHorse · 01/10/2022 17:38

Is your mortgage variable or fixed? Are your payments affordable or are you stretched? Is your house in good order or does it need work? All these questions should impact responses!

inheritanceshiteagain · 01/10/2022 17:39

Wont there be a penalty fee to pay.

SmudgeButt · 01/10/2022 17:49

If there are no penalties for making a huge overpayment then do so. Who cares about an emergency fund?? (vastly over rated frankly).

You will have no more mortgage payments so a great whack of money available every month. You won't be at the mercy of interest rises and remortgaging at completely the wrong time. I've done this - very liberating. And it saves us sooooo very much. Why pay interest to the bank when you can invest in yourselves instead?

Buttercup43 · 01/10/2022 17:51

If you're on a variable rate I would pay off as much as possible whilst keeping back a slush fund of 6 months just in case.

From your post I assume you are unmarried, if you are, please please please get legal advice re: ownership of your property and entering into a Declaration of Trust before paying anything off. You don't want to find yourself in a position where your financial contributions are not recognised because you own your property as joint tenants.

Beelezebub · 01/10/2022 17:51

Nope. Why would you put yourself in a position where your assets are not liquid right now?

SarahSissions · 01/10/2022 17:52

Impossible to answer. Are you in a fixed term or following a tracker? On a tracker I’d pay off, on a fixed term I’d carry on the repayments +10% until the term ran out and then pay it off

HTH1 · 01/10/2022 17:53

I would absolutely do it, then keep making the same ‘mortgage’ payments into your savings. You’ll probably save a fortune and be 100% cushioned from all the rate rises.

skyeisthelimit · 01/10/2022 17:53

I would pay off 10% or half so that you are left with some savings. Nobody knows what the future holds. Once you have paid some off though, you could either overpay the mortgage by keeping the repayment the same, or save the difference to keep building up your savings.

TiaraBoo · 01/10/2022 17:55

Is the house owned by you and DP? If you pay it off, will you be able to legally take your share if you had to sell up?
what’s the fee for paying it off?
how secure are your jobs?

Frenchfancy · 01/10/2022 18:00

If there are no penalties then pay it off. Then use the money you save each month to rebuild some savings.

If the money is in savings you might be tempted to use it for something non-essential.

LizzieSiddal · 01/10/2022 18:01

No way, keep 6 months in your savings just in case you lose jobs/I’ll health etc. Then use the rest to pay down the mortgage and keep overpaying until it’s gone.

perenniallymessy · 01/10/2022 18:02

Given you say DP and not DH, I would say don't do it unless you can get a legal document to ring fence the extra you have put in (assuming you both own rather than it just being yours).

BustPipes · 01/10/2022 18:03

Given inflation is going to reduce the real value of your savings, and assuming (like the rest of us) you won't get a pay rise matching inflation, I would pay off a sizeable chunk now and reduce your monthly payments, but keep some back.

Assuming DP contributes to the mortgage, I'd also ask him to save the difference in his monthly payments until he matches what you've kept back...

Snoredoeurve · 01/10/2022 18:04

Chompiemompie · 01/10/2022 16:28

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?

Hang on
So youwould be paying off your jointmortgage and you arent married?
No if he has zero savings (why?) You are literally gifting him half your savings.

etulosba · 01/10/2022 18:04

I don’t understand the obsession with paying it off. It’s cheap money.

Keeping your savings gives you flexibility and it pays you interest. You can pay your mortgage off if you really need to in future, but you also have the means to deal with other unexpected costs.

perenniallymessy · 01/10/2022 18:04

Also, depending on if you have a decent fix, you might actually be able to earn more money on savings so don't pay off until the fix ends.

LemonPledge555 · 01/10/2022 18:07

How secure are both your jobs and how quickly will you be able to build up a similar/worthwhile nest egg if you were to save what you would be paying in mortgage payments?

Obviously interest rates come into it too.

We did similar a year and a half ago. Got to the end of the mortgage term and paid off the balance. Wiped out a lot of savings, but replenished v quickly as the mortgage was quite high, as in over a shorter term than is typical.

balalake · 01/10/2022 18:07

Check things such as penalty payments etc, but in the absence of those, in your shoes I'd pay it off. Then save the payments per month you are paying to build up a nest egg.

notacooldad · 01/10/2022 18:07

I don’t understand the obsession with paying it off. It’s cheap money
Well for me it is £650 not coming out if my wages every month plus I've saved £1000's in interest.

LemonPledge555 · 01/10/2022 18:08

Since you’re not married, I would suggest you have a deed of trust written up though.