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?

How is it overrated ?

Seek professional advice, don't ask a bunch of people online

Some other factors to consider.

Moving house is going to be extremely expensive. Even if the value of the house you want drops, yours will too. Does the house you currently live in fit your needs going forward? If you have dc/more dc, do you have enough bedrooms/bathrooms? Do you need to use this money to make significant changes to your home? Loans are expensive so think about how you may need to use this money practically.

Obviously the security of your money is tied up with the security of your relationship. This needs to be carefully considered and you should absolutely protect your financial well-being.

If I were you, and you had no big improvements to make, and you had secured your money….I would overpay by 10% for two years then at the end of your fix, pay off the balance. I would also try to make sure I was building a nest egg for when the mortgage is paid off.

pay off your mortgage, save for extras. Mortgage rates are on the rise. I had 14.5% interest years ago. They could rise further. Secure your home. Deal with the other stuff as it happens.

At the moment you're paying higher interest on your mortgage than you're getting on your savings so probably better to reduce your mortgage.
But best to keep enough savings to cover you if either of you lose your jobs.
Everybody's situation is different and it always pays to get professional independent financial advice. The CAB (link below) tells you more about getting financial advice.
www.citizensadvice.org.uk/debt-and-money/getting-financial-advice/#h-getting-financial-advice

I'm too lazy to back read 7 pages.
Important point, you might want to speak to a conveyancer, if you're not married and you're putting in let's say 50k of your life savings, I think it's worth finding out if your solo contribution can be registered somehow.

If the relationship crumbles and you sold up in 2 yrs for example, DP would massively benefit from your savings. To me this needs to be ring-fenced somehow. Also why do you have tons of savings and they don't? Will they commit to saving if you did this for your couple/family?

I would want to keep my savings as you definitely need to have money put aside in case of any unforeseen circumstances.

Paying off most or all of your mortgage means that you can build a nest egg pretty quickly or start putting money into pensions or ISAs.
All depends on what percentage of your income is your mortgage, any mortgage penalties, are you on a fixed rate (will limit how much you can overpay anyway) and maybe make the overpayments over a couple of years to spread the risk of being without cash. Or make smaller monthly overpayments to reduce the term and a slightly larger one at regular intervals. I use this approach to make my mortgage a pretty manageable amount each month which I use to invest on home improvements.
Just need to write it all down.

Pay off half only and half in rainy day fund.

Pay off the mortgage without a doubt. Then just pay your mortgage amount into your savings account every month until you’ve built up a nice cushion. It’ll be lovely knowing that, if one month you can’t afford all/some of the payment to your savings account then you can just pay less. I’m jealous just thinking about it!

Hi everyone. Sorry I have not been back after original post - family emergency to deal with.

We are on a variable rate which looks set to hit 4% soon so want to make a decision v soon.
My savings are in the bank so not is stocks / shares.
DP and I are both on the mortgage but it is already in a minute of agreement that 60% me and 40% DP as I put down the deposit. I would want any further contribution to show that.
The remaining mortgage is 50k and my savings are 52k at the minute.

We are both working - DP in NHS and I am quite a senior role in a charity but we rely on govt funding so a bit nervous after 2025 when current funding ends.
We have 2 dcs, 15 and 8 Yr old. We have trust funds for them, not much but something if they want to go to college, uni etc at 18.
Both DP and I are in good health but not complacent as both recently turned 50.

I really sort to get my finances in order, not just mortgage. Pensions and a couple of other v small savings / isas. I have been lax.

Thanks for a the advice, it put a spur on so appointment made for next week.

@Chompiemompie
There's advice about variations on this theme on the Money Saving Expert site today:
www.moneysavingexpert.com/latesttip/?anchor=overpay&utm_source=MSE_Newsletter&utm_medium=email&utm_term=04-Oct-22-04101ad59d146adb943-633d26c777580cd755e80e061a4bc195&source=CRM-MSETIP-04101ad59d146adb943&utm_campaign=nt-highlights&utm_content=2#overpay

It's recommended that you have 3 months worth of salary as your savings. You could put the rest in Mortgage rather than pay it all off especially as interest rates have gone up. I don't think you need to do one or the other.

You do have a rainy day fund, its your house?!

I would look at 2 things -

• What int are you paying and how much interest are you earning on your savings?

If mortgage interest rate is low (2% or lower) for at least a period of time, you could

Either pay most of your mortgage off and keep a bit fir a rainy day - maybe hold back 6m income. In a couple years you'll be mortgage free anyway.

Or pay the full mortgage off and save the mortgage payment every month to build up your capital savings again. In 6months you'll have a cushion in case things go tits up in this recession.