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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:
Sarbears28 · 01/10/2022 19:03

I'd pay off the mortgage, and still save our current mortgage monthly amount in a savings account to build the nest egg back up. Always best to be mortgage free.

andtheweedonkey · 01/10/2022 19:05

I wouldn't we haven't

You might need cash for repairs etc. Or if you get made redundant and need cash for day to day costs. What would you do then?

Maybe overpay a bit each month, but you need to keep some savings in a fairly "liquid" account IYSWIM.

somebodycutmygrass · 01/10/2022 19:05

Pay it off if you're certain you're jobs are guaranteed .
If you ever have to claim universal credit having a mortgage, however small gives you a sizeable disregard of earnings.
I'd go with paying off everything bar a couple of grand unless that would leave you with savings over £16,000.
I paid mine off this year as my inheritance was quite substantial..

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General money
Crunchingleaf · 01/10/2022 19:08

Depends on a couple things.
If there is a penalty for paying off the mortgage early or making overpayments.
Are you fixed or variable.
The interest rate of the mortgage and interest rate of your savings.
Once that mortgage is gone then it does provide a safety net for you
It will be easier to save again when the repayments are gone.
If you worried about not having a rainy day fund you could hedge you bets and pay off half it?

Endoftether2000 · 01/10/2022 19:12

Pay the mortgage, you can then save the mortgage payment as nest egg. You will always a roof over your head which is yours. If you can't pay bills that can be negotiated 👍good luck with your choice ☺️

dianthus101 · 01/10/2022 19:21

It depends on the interest rate of the mortgage compared with the interest rate of your savings. My mortgage interest was similar to the savings so I kept the savings and the mortgage. Otherwise I would have paid most of the mortgage off but kept a bit of savings as a rainy day fund.

RedToothBrush · 01/10/2022 19:21

Qisk · 01/10/2022 16:32

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

This is what I'd do.

I wouldn't leave myself with no savings.

If you need to pay off the mortgage, you can. Thats the big thing.

Hillary17 · 01/10/2022 19:22

Depending how much it is - with the world the way it is right now I’d probably leave 1/4 back for a rainy day / emergency.

PiffleWiffleWoozle · 01/10/2022 19:28

I would get an offset, put the savings against it, and build up a 6 months living expenses fund outside of that with the amount you would normally pay off the mortgage with. Then not renew the offset once that level was reached.

PiffleWiffleWoozle · 01/10/2022 19:30

Though would only do this with my £ if married or otherwise financially protected (eg legal agreement)

Fleur405 · 01/10/2022 19:32

Depends how quickly you could build your savings back up again - presumably you could save whatever you are currently paying towards the mortgage?

Sj595 · 01/10/2022 19:39

Another vote for offset, they’re great as you don’t pay interest on the amount of the mortgage for which you have equivalent savings, but you can still withdraw savings if you need them. We have one with Yorkshire building society

Ana86 · 01/10/2022 19:41

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.

I don't understand this point. The risk of a price crash is on the homeowner whether or not there is a mortgage on the property. The lender doesn't benefit from rises or lose from falls (save to the extent that there is security for the loan)

lalaloopyhead · 01/10/2022 19:50

Have a look at offset, if they are available. I got one a couple of years ago and with interest rates so low it made sense. My savings are now almost equal to my mortgage with 15 years remaining, and I pay about £6 a month in interest. I will still with offest until I have suffice savings over and above mortgage balance that I feel I have a comfortable buffer.

TheFormidableMrsC · 01/10/2022 19:52

I'd pay it off and put the equivalent mortgage payment into savings going forward.

Goingforarun · 01/10/2022 19:54

Ask your building society When would the mortgage be paid off if you doubled your monthly payments. I did this many years ago I paid £50 extra month and reduced my mortgage term from 25 to 8 years! This way you keep your rainy day/ fun money How do you become mortgage free so much quicker

Dave20 · 01/10/2022 20:01

You could pay it off, presuming there’s no early repayment penalties. Then put into savings what you were paying on your mortgage.
If you pay £700 a month on your mortgage, pay that into savings instead.

LimpBiskit · 01/10/2022 20:17

As with any significant financial decision, it is worth seeking professional advice. There is a logical component to paying a mortgage off and a psychological component. I paid mine off 5 years ago and purely financially, it wasn't the optimal thing to do at the time but it provided a sense of relief knowing that I was mortgage free and it's definitely a bonus now. A good financial advisor will talk you through all the options.

AuntSalli · 01/10/2022 20:18

DP so you’re not married then ? His name is this Mortgage and are you tenants-in-common ?
i’m a bitter and twisted divorcee and I thoroughly recommend that you do not ever leave yourself in a position where all of your assets are tied up in something that is jointly owned.

WilsonMilson · 01/10/2022 20:19

I would pay down mortgage and keep 20% of your savings for emergency.

Although, If you’re not married but jointly own, I’d not be putting my savings in for my dp to benefit from in the event of a split and sale. I’d be having an agreement drawn up to protect the lump sum in the event of a split.

Dreamingcats · 01/10/2022 20:20

Assuming no penalties I'd pay it off. If there are penalties, I'd overpay the max allowed each month until the fix term ended, then pay off the rest.

I was in this position once. I decided to "invest" the money instead to get a better rate of interest and the company folded. Lost all the money. Soooooo regret it.

HammerMyhome · 01/10/2022 20:32

Absolutely not. If you keep the money it’s there to pay the mortgage off anytime you need it.

also you say DP - does this mean you’re not married? Be very very careful about finances seem advice

HammerMyhome · 01/10/2022 20:35

Just seen you’re not married. Absolutely no way should you pay off of a mortgage on a house you jointly own. He could leave next year and take half the equity. Make sure you seek an IFA and get necessary assurances in place. I’m glad I did because my fairytale 20 yr marriage ended with him leaving and I was so glad I’d ring fenced what I’d put into the house

TakeMe2Insanity · 01/10/2022 20:54

Pay it off. With current anticipated increases your unlikely to get this opportunity again.

Hohofortherobbers · 01/10/2022 20:57

DP? Absolutely not. Unless you have seen a solicitor to ringfence your investment I would not be paying off a mortgage with someone I was not married to. Keep your personal savings in your name alone.