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?

Because you directly quoted me saying "Mo you don't".
If you're going to directly contradict me, then I will take the time to directly explain why you're wrong.

I just think 20k is excessive.

to YOU!!!

for many with financial responsibilities up to their eyeballs… it wouldn’t scratch the surface
OP hasn’t suggested that she is up to her eyeballs in financial responsibly though.
Me and my friends talk quite openly about savings. All of them have less than 10k except for one who has sold her house that was paid for and moved in with her mum to care for her so she has 150k.

Maybe it’s a demographic thing as well. The other poster was quoting £2- 3k a monthly living expenses plus more at Christmas. We don’t even take that much home in our wages!!
I live in a deprived Northern area. Seriously 20k is a lot of money not just to me but most of the folk around me.

The OP “hasn’t suggested” a heck of a lot despite a very brief OP!

Maybe it’s a demographic thing as well.

Of course it is!

I am SE commuter town outskirts of London and £20k as a “back up” would certainly not be “excessive”

one of my childrens prep school fees is £16k a year. One. £32k a year. And that’s obviously after tax paid on income!

The OP “hasn’t suggested” a heck of a lot despite a very brief OP!
Actually that is very true. We have only had one opening post and everyone else has been throwing opinions around like confetti with no input from OP.
😂
Time to draw a line on this one!

@notacooldad - £20k might be a lot for some, I don't think £10k is excessive for anyone once a few emergencies and basic bills are taken into account.

Our expenses are approx £320 council tax, £260 gas/electric, £60 for 2 mobiles plus broadband, £40 water, £40 insurance, £40 TV license plus streaming services, £100 or so on clubs, £550 cleaner / window cleaner, £235 business running cost, £50 childcare vouchers for holiday camps, £100 DS saving = £1795 fixed expenses. Then any food, travel, entertainment, toiletries, cleaning products, new clothes, shoes, school trips, party gifts, days out, Birthday/ Christmas, holiday, pensions, our savings etc. It would take months to give a cleaner notice, adjust funded items like vouchers and cancel clubs or subscriptions, and we can't wind up the business if we want to work the next month, so the costs simply have to be factored in for a bit. Great if you don't have much in regular expenses but it might help to see how they can add up.

Definitely pay your mortgage off. Then pay the amount you would be paying on your mortgage every month back into a savings account. It will soon add back up. In the meantime get a credit card for emergencies.

Pay it off!!! Definitely the best thing we ever did.

I agree with this, it isn't clear at the moment if there will be a recession and it's always possible that one or both of you could lose your job.
Honestly I think Its better to pay off part of the mortage (if you can do this without penalty) and so shorten your mortgage term, always keeping back a six month "rainy day" fund. It's a hard choice though, particularly as interest rates on savings are still much lower than the rate of inflation and the mortgage interest rates.

We most likely have a global recession looming. Cash is king in a recession. Keep a 6-9 month buffer in cash of living expenses and consider paying off some of the mortgage with what’s leftover of your savings so you can save on the mortgage interest.

I would keep the mortgage going and save the rainy day fund - you're more likely to need it over the coming 1-2 years.

Sorry to use your thread, but does anyone know:

we want to overpay more than it is allowed in one year (more than 10% in our case). We don’t mind paying overpayment fee which is not that much in a grand scheme of things. Will it affect credit rating or future mortgage eligibility (our deal expires in 3 years)? Or is it a simple case of paying overpayment fee and that’s it? Thanks.

@angela99999
We always reduced monthly payments rather than a term while we overpaid having during the last 2 years. Our thinking was that by lowering monthly payments we increase our ability to save money and further repay if you know what I mean. Our deal expires in 3 years and presumably that’s when we can make a new deal and reduce the term? Is my thinking wrong? Or is it a valid alternative? Thanks

Not having, heavily*

50 / 50

If you have more than £6,000 is savings it will affect what you get on UC and if you have more than £16,000 you can’t get UC. No idea what your financial position is or what kind of job security you have, but if you’re out of work any length of time you will lose your savings. Better then, I would have thought, to safeguard them in the recession that is well on its way, by paying off the mortgage.

Do it. There will be infinite financial algorithms and ‘what ifs’ but you are left with a roof over your head that no one can take away. It’s a joyous feeling. Save the mortgage payments and see how quickly your rainy day fund builds.

Keep at least one year of expenditure in the bank and use the balance to reduce the mortgage then keep the payments the same so you accelerate paying it off

Makes no difference if they are married then? If they were married, he would still be entitled to half?

Leave yourself enough for a rainy day and use the rest to pay off mortgage. Blitz the rest of the mortgage.

Then once it’s paid off, set up a standing order to an ISA with the amount you were paying on your home loan. You will soon rebuild your savings.

I would suggest paying either half if no early repayment or hit the max repayment you can do in a year. Always best to have a nest egg.

OP - there’s some really poor advice on this thread. Please seek proper financial advice. FWIW - t’s rarely advisable to pay off a mortgage early and to be left with no savings…. Should you lose your job etc the only option you’ll be left with is remortgaging or selling. Should your partner leave you’ll be left with even less. My advice would be to look at how you can make that nest egg grow and to also consider your pension pot too.

i paid mine off at the beginning of the year.

Regular payment of credit contributes positively to your credit score, so no mortgage and no credit card usage would eventually reduce your credit score. Fot someone with an otherwise decent credir history the reduction would not be enough to cause an issue getting reasonable credit for at least 5 years, so it's all a bit theoretical. If you have no other debt beyond 5 years then you would really keep a credit card that you use a bit and pay off monthly to keep your credit score ticking over.

Your overpayment fee isn't for the full term, usually it should disappear at your rate renewal date, so check dates and fees carefully. It might be cheaper paying 10% now and the rest at rate renewal in a year or whenever that is. Also worth a call to find out which 10% you can pay without fees; original borrowing, the amount at start of the year.or current amount.

You can reduce the term at renewal if you want,.or your provider might let you do it sooner. Perversely, it can get tricky if your mortgage gets to be too low; you can't switch providers on a nice deal for only £10k over 10 years for example. At a certain point you are forced to just repay or put savings elsewhere to keep a big enough mortgage.