If you’ve cleared your mortgage early, has the heart over head decision been worth it?

[InDreamsHeCame]

Very generally speaking, a lot of financial advice suggests that it’s not really worth clearing a mortgage early if you have a decent interest rate because the money you have to hand could be earning more if you invest it.

Obviously, there are different factors to take into account but that’s the broad argument from an entirely financial point of view.

I’m in a position where I inherited a house that’s shortly going on the market. Once sold, it should mean that I’m able to clear, or almost clear, the mortgage on my home.

Psychologically, this would be huge for me. I’ve been paying a mortgage for over 20 years (not the same property the whole time). At times in the early days, it was difficult to make the payments at times (property market issues, interest rate inflation, redundancy etc) but it was paid every month and sacrifices were made to make sure that happened. Thankfully, in a better position financial position now so the mortgage isn’t as much of a strain, but it’s always at the back of my mind that until I own it outright, I could technically lose my home if something happened (unlikely, but possible).

So, for me, it’s a heart over head decision. I’d likely make more money if I sold the inherited house and invested the proceeds and continued paying my mortgage for the next 10 years.

If you’ve weighed up the heart vs head elements and chosen the former, how do you feel now? Would you do it again if you went back in time?

Yes we paid the 25 year mortgage off in 15 years so saved loads of interest. I then saved all the money id have been paying out, used it to buy a house in france, then took early retirement and moved out here permanently. Just in the process of selling the UK house now. I wouldn't change anything. I dread to think of still being in the UK plodding along making the payments just because someone said it was better.

We did for the security. At the time I was glad we did it, but now I am not sure it will be worth it.

This is what I wish we had done.

We paid off early. Good decision. We've been able to save more as no mortgage to pay. Has eased the pressure as well. Psychologically for me - major breadwinner in a very pressure sakes job- it was a godsend and allowed me to retire early.

Getting higher levels of interest elsewhere is rarely guaranteed. We paid the mortgage off early and never regretted it.

Thank you.

I think we’ll end up doing something similar. We’re in Dublin where the housing costs are just eye watering. Can see us downsizing as part of an early retirement, and then looking at a small apartment somewhere abroad, spending time between the two as needed.

I wouldn't care if I had enough money to clear it in savings anyway. If anything did go wrong you just pay it off with that, but you can make more money in the meantime.

Can I ask why, @Trolleysaregoodforemployment?

We are about to pay ours off, as there’s a relatively small amount left. The markets are all over the place at the moment so it feels like a safer thing to do than invest right now.

What do you want to do with your money and your future? You have to decide that to know what is best for you.
Do you have a pension?
Do you plan to work until retirement age
Is your income secure until then? If not why not and how much do you need to live?
when you retire how much will you need to live?

You need to know the answer to those questions before anyone can give you advice.

I inherited a smaller amount and did half and reduced the mortgage to £45,000 with a fixed rate 2.2% for 5 years (to be paid off next year). House is worth about £600,000.
I wanted a financial cushion so kept some money back- although savings rates are dreadful it’s less than the mortgage interest at the rate I got .
Replaced the windows on the house and a large area of decking that was in a poor state with some of the money and kept some for replacement of my car (not done yet). The house could do with new inside doors, and carpets at some point which will happen once the mortgage is paid off.

I would like to have the mortgage paid off, but have enough in savings still to do so if necessary.
I feel proud of myself for keeping the house on after divorce and buying out my husband.
There is an element of insecurity once you are only dependent on yourself, but am glad I have some money for the current cost of living.

There’s so many variables including age, divorce, health, pension and individual priorities that no one can tell you what is best ultimately.

This boils down to asking whether, if you put your money in a lower risk place in the past, do you now regret it with the benefit of perfect hindsight.

I cleared my mortgage rather than the sensible option. I did this in part because interest rates had leapt up while I still had a low fixed rate mortgage and so saved hard and cleared it at the end of the fix, rather than apply to re-mortgage.

I now pay what I paid in mortgage into my pension instead.

I like the fact that I have cleared the mortgage and don't feel under as much pressure financially now. I am well aware that it wasn't the most sensible option but somehow still wanted it gone more. I do have a lot of catch up to do on my pension and am desperately keen to be in the financial position to be able to choose whether to work or to take a less stressful job.

If I had my time over, I would still clear the mortgage purely because of the feeling of security and it taking pressure off.

Now you will have to pay capital gains though….

I think clearing the mortgage is the sensible head based option to be honest.

Clearing a debt is always going to be the most sensible option, surely?

We decided to pay extra so we could be mortgage free at 50. Was so worth it.

Not necessarily

Yes, 1000% yes.
Psychologically, it is SUCH a great feeling.

Made work life so much better - for example sitting there in a meeting whilst they are telling you about some new overhaul which makes no sense, and knowing, that they need you more than you need the job is SUCH a freeing feeling.
The feeling of security is just wonderful.

I would definitely do it again if I went back in time.

I'm aware that there will be a small amount of CGT. This isn't a thread about that though is it?

I paid mine off just before I was made redundant. It enabled me to take a lower paying job with less stress, and keep most of my redundancy in the bank.

We did it with an inheritance, I remember the financial advisor saying it would be better to invest. But I will never forget that feeling, going into Abbey National (shows how long ago that was) and writing a cheque for 90 000 to clear it. The teller’s face was a picture. Even though, after credit crunch our house went into neg equity I have never regretted it.

I paid mine off early and spend the money I would have used for the mortgage on holidays. Works for me.

Yes really glad we chose to pay off the mortgage. Knowing you fully own a home no one can take away is a powerful feeling.

Of course you should pay the mortgage early it will save you a fortune in interest and bring financial freedom. The chances of you out investing those savings are slim unless you are a financial wizard.

We cleared ours and honestly I think that the psychological boost is absolutely priceless.
It has made a huge difference to our outlook.

I get what you’re saying about interest rates and investments but having lost an eye watering amount in 2008, I like the tangible security of my own bricks and mortar.