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?

This. No way would I pay off it all on joint mortgage and leave myself with zero savings.

An offset mortgage has worked well for us, I can’t remember the last time we paid anything.

There isn’t enough info here to give a firm view however generally I really don’t understand this weird obsession with paying off the mortgage. Toward the end of the term it is largely principal repayment so usually makes far more financial sense to do other things with your money. However you should look at how your savings are managed and chat to an advisor about maximising the return, maybe investing some of these are currently just cash savings.

Only if your percentage/stake in the house increases to cover the amount you use to pay off the mortgage and you have a written, legal agreement to that effect as you're not married.

And even then, only if you're not on a fixed rate that you can cope with at the moment. You don't want to pay penalties for paying it off now if you don't have to.

Speak to a financial advisor. Without a full assessment of every aspect of your finances no-one can know what is best in your circumstances

Did op ever return?

There is a circular debate always on what to pay off. Mortgage or invest.

Op says savings but never clarified if they are investment in stocks or savings in a bank.

In ops case I'd pay off a chunk but keep savings. .

We try and do both.
We do over pay but by a smaller amounts we should probably try more.

OP, what is the interest rate on the mortgage?

If you can beat the mortgage interest rate with savings, you're not losing any money, and could even profit, by keeping your mortgage going and saving separately.

If you can't, then it's probably best to pay off the mortgage, or hedge your bets by paying off some, but not all.

We were in exactly the same predicament last year - we ended up paying the mortgage off. It's a lovely feeling as we now have no debt at all, not even a car loan etc. We have spare money to put into a savings account to build our savings back up.

For me, I feel the biggest risk is the huge commitment to extra monthly outgoings - you then are really stuck if your lose your job.

By next year, I could give up my well paid but crazily full on, stressful job. So I may change careers and it won't matter how much I earn 😁

You do need an emergency fund of £10k-£20k to cover new boiler, car repair and a few months of bills, so I'd hold that back. Also be wary of redemption penalties, you might have to do just 10% (though depending on the cut-off system your bank uses there could be 10% put to last year plus 10% this year, give the provider a call to see what they can do).

We like not having a mortgage. In a choice between debt or no debt, it is clearly the more relaxing option to have none, and I think that's why you're considering it. Once it's paid off, it may make sense to focus on pension for savings value. Financially a pension would often earn more, but that doesn't impact your monthly cashflow, so it doesn't have a quality of life impact. Pensions are also affected by market turbulence, so you want invest in months when the market is relatively low. FTSE trackers are also an interesting investment in some markets, though there is the same risk involved.

I presume you both have shared finances and some way of sorting out a split if you separate, if not ask a solicitor to edit property share in whatever way is fair for your set-up.

You do need an emergency fund of £10k-£20k to cover new boiler, car repair and a few months of bills,
Mo you dont.
Her bills are already being paid anyway. The savings will soon start to build up again once the money that was used for the mortgage is saved.

Of course she needs some savings. When the boiler breaks, should she just wait a few months for a new one? Or pay credit card interest? Being patient for a few months to save that emergency money first is sensible.

Of course she needs some savings. When the boiler breaks, should she just wait a few months for a new one? Or pay credit card interest? Being patient for a few months to save that emergency money first is sensible
You dont need up to 20k.

I suspect you could probably do better for your money elsewhere. Some of it depends on how old you are, your interest rate your health etc as well and the psychological benefits of paying off the mortgage. I personally wouldn’t feel comfortable with no savings. I’d want at least 6-12 months available before paying it off the mortgage.

if you’re on a fixed, I’d put some money in savings (likely paying higher than your mortgage interest) view a view to paying down when you come off the fix if rates are high. And consider whether some of the money might serve you better in a pension for the tax benefits.

we’ve got a 10 year fix for 2.2%. It makes no sense to overpay when there are now cash savings at 4%. I’m also going to start putting some overpayment money into a stocks and shares Lisa to get the 25% uplift and hopefully some growth over the 2%. I won’t be able to access until 60 so a gamble as won’t be able to access it at the end of the fix to pay off a lump sum but will also hedge my bets by doing some cash savings.

id be more inclined to overpay if I was on 5% plus mortgage rate though.

£2-3k/month living costs (higher over Christmas, birthdays etc),£3k new boiler, £4k car repairs, £1k washing machine / oven / TV, £200-600 unexpected water/gas leak, broken window, new shed, repair garage door mechanism, fix guttering, etc. Holding 3-6 months expenses in case she needs to stop work for any reason plus emergency replacements is easily £10-20k. If it's a washing machine that breaks instead of the car, or cracked guttering instead of the boiler, then it's cheaper, but nobody gets to pick when those costs arrive.

£2-3k/month living costs (higher over Christmas, birthdays etc),£3k new boiler, £4k car repairs, £1k washing machine / oven / TV, £200-600 unexpected water/gas leak, broken window, new shed, repair garage door mechanism, fix guttering, etc. Holding 3-6 months expenses in case she needs to stop work for any reason plus emergency replacements is easily £10-20k. If it's a washing machine that breaks instead of the car, or cracked guttering instead of the boiler, then it's cheaper, but nobody gets to pick when those costs arrive

if all those disasters happened in a short space of time I would think I was cursed!!!
OP already has her living costs. Sorely leaks and stuff are an insurance issue.
2-3k livng costs, more over Christmas! What the hell!
4k car repairs, that's twice the value of my car. It would be cheaper to buy a new one
Garage mechanism and shed repair. I dont even have a garage or shed ( although I do have a very large walk in from ground level basement! We clearly live different lives!🤣🤣
I didnt say have no savings . Only op will know if she needs 20ks worth.
I cleared my bank out to pay the last 40,000 of my mortgage the other year, BUT, I'm married , my job is secure and so is DH's, I have house and contents insurance so if any if your gloomy disasters should have occured I was covered and I can access money from other places if I had to.
Spoiler- I didnt.

@notacooldad - the point is about suddenly not working but with all household bills to cover plus some extra expensive items. Believe me, a new boiler will not be on your insurance! Nor will a nice white crown or implant at the dentist if a tooth gets an issue. You didn't have any extra expenses and have loads of funding sources that apparently include your DH 🙄, whoopee for you, that doesn't mean it's sensible for most to have no backup cash for emergencies. OP references clearing out all savings, to suggest she hold something back isn't really as controversial as you appear to think.

I'd pay off the mortgage and keep paying the mortgage payments into savings. DH has a good sickness benefit with the nhs, and I have enough in my business bank account to pay my wage for a couple of years so a temporary sickness leave would be ok in our circumstances.

the point is about suddenly not working but with all household bills to cover plus some extra expensive items. Believe me, a new boiler will not be on your insurance! Nor will a nice white crown or implant at the dentist if a tooth gets an issue. You didn't have any extra expenses and have loads of funding sources that apparently include your DH 🙄, whoopee for you, that doesn't mean it's sensible for most to have no backup cash for emergencies. OP references clearing out all savings, to suggest she hold something back isn't really as controversial as you appear to think

You missed my point. I never said not to have any back up, I said 20k was excessive. There are more than enough mner's on here that will not have 20k savings anyway should all these disasters happen! If op did wipe her savings out, she is immediately starting her savings again the following month+ the extra savings from what would have been the mortgage payment. The savings would soon mount up.

I havent got loads of other money sources but I could have used a credit card to get interest free purchases, I could have taken out a bank loan should the very worse happen. If I lost my job I would get redundancy, if I went off sick, I'd get sick pay. There's house and contents insurance for floods and leaks. I'm very similar to most other people.

To be honest the savings or lack of them isnt the biggest worry with Op paying if her mortgage but that issue has already been discussed.

There was a weird thing with our original mortgage where we’d be charged £500 if we paid it off early but if we paid off all but £1 it would be fine. That mortgage company stopped doing mortgages, probably because they were so bad at it…

So you could pay off some but not all if you have early exit fees.

Once again, talking about your own circumstances. Getting good redundancy pay (doesn't apply to all), picking up a new interest free credit card (while unemployed - no, and no to loans either!), getting your insurer to buy a new boiler (they won't), full sick pay forever (not SSP, not self employed, not a long term illness) eyc. Anyone can get into tricky situations with lots of expenses at once, the point is OP does have savings and is actively deciding to pay off mortgage or hold some back. She can be cautious or not, but your "oh it'll probably be fine cos I had totally different circumstance and no issues so I was fine" is not prudent advice.

Common 30 years ago.

they wanted to maintain you as a customer as you may want to take out a second mortgage or additional loans etc

makes sense

To be fair, given the op hasn’t bothered to come back , understandably develops in to personal circumstances!

I never said not to have any back up, I said 20k was excessive. There are more than enough mner's on here that will not have 20k savings anyway should all these disasters happen!

how on earth do you know “excessive”

would be a shit show if my brother just had £20k back for example as has four kids at private school depending on him, and that’s just for starters

She can be cautious or not, but your "oh it'll probably be fine cos I had totally different circumstance and no issues so I was fine" is not prudent advice
I'm not the only one who said pay it off and said you can start saving again, yet I'm the only one you are challenging about it. Why's that?
Others have said pay it all off and start saving again. I do think it is prudent to keep some back, I'm not against it. I just think 20k is excessive.

I just think 20k is excessive.

to YOU!!!

for many with financial responsibilities up to their eyeballs… it wouldn’t scratch the surface