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?

Absolutely worth it. Knew very well we could probably make a higher rate with investments but that’s never actually guaranteed. I felt a huge sense of security from owning the house outright, knowing even if we lose income and the house value drops massively we might be poor on paper but we still have somewhere to live. In the end I’m not trying to maximize a number on a computer screen but the actual practical value in my life. Owning our home without debt had far higher real value than the amount of investment we could have had instead. And because we managed it quite early we switched to other investments after that with the spare income — though I’m still cautious with investing and prefer to keep a good chunk in cash and govt bonds.

Had relatively small amount left and wanted to move. Sale of house would buy other house. Didn’t want to borrow more so deals were not great as LTV not high. Felt good to buy current house outright.

Mortgage free by 47 and using mortgage money to support DC at uni as don’t miss it.

Also, my mum had to start a mortgage on her own at 45 and we supported DH’s parents paying theirs off at 65 so we are well aware of how lucky we are. Not high earners but I bought in 2000 and we never bought the ‘flashy’ house, we bought what we could comfortably afford

I’m lucky enough to be in a position to pay off my mortgage. But am choosing not to I earn £400 interest per month on my savings and my mortgage is £550 . So decided not to pay off mortgage .

No regrets about paying ours off. It freed up money for other things we wanted/needed like house renovations, driving lessons for son and then funding him through uni. Plus some more adventurous family holidays which have been amazing shared experiences. We would not have made interest in the investments because the funds were spent rather than invested!

are you on a fixed term mortgage with a low interest rate, if so I would wait to that ends and then pay it off. So we have Xx thousand left on our mortgage our fixed rate of 1.2% ends in July. So we will pay it off then. Currently the xx thousands is sitting in a bank at around 4% interest. I wouldn’t dream of investing the money in stocks and shares as I want the security of owning my home. However if that fixed rate were to last another ten years at 1.2% no way would I pay the lump sum to the bank to pay it off.

What's your current rate and can you get a higher guaranteed rate? We currently have enough to clear our mortgage tied up in long term bonds. Our mortgage was pre-Truss, so we have an amazingly low rate and we can still get fixed rate bonds at a higher rate (current NS&I bonds at 4.2% for example).

We're very risk averse, so wouldn't "invest" our money in anything that didn't have a guaranteed return or risk losing any of it, but there's no point repaying a mortgage that's on a lower rate.

We've not had a mortgage since aged 42, all paid off but we live in a small house (and because we did the North to South move where everything so much more expensive).
With the cost of living increasing so rapidly over the last few years, not sure we'd have been ok if we'd still had a mortgage too. Luckily we've not had to change much of our lifestyle so far. For us, it's peace of mind and being able to cope as never know what is around the corner.

We paid ours off early and have never regretted it.
We are both self employed and earnings, although high, can be up and down so it’s meant a huge mental relief to us. However we also paid large amounts into our pensions so we can retire early. I don't think it’s sensible to pay off your whole mortgage if your pension is low.

I have now paid down the mortgage, but for some years I was in a position where I had "virtually cleared it", i.e. I had set aside funds that could pay the mortgage down at will, but invested these funds to earn a rate higher than the rate on the mortgage. This worked well for a number of years.

OP don’t forget that once you have maxed out your tax free ISA allowance, you’ll pay tax on any interest you earn.

We have a small house and the mortgage was £550. The very low interest rate ran out and we had the option of having a mortgage which would cost us £900 a month or pay it off. We paid it off with some inheritance and a lot of saving.

It’s lovely knowing that the house is ours no matter what. I’m 45 and my husband a couple of years older. Doesn’t matter what happens with our jobs.
Don’t want to invest, I don’t understand it and I’m not interested - I just want an easy life. Some people might disagree but we’re happy with our decision.

Paid it off at 29 and never regretted it. Gave me more freedom to pick and choose jobs, a lot of peace of mind, a sense of achievement and financially worked out well. Would do same again.

Investing isn't guaranteed. I received a medium inheritance once, before I was married, and decided to invest the money instead of paying off the mortgage. I lost a large percentage of the money and really, really regretted it.

When I got married we prioritised paying off the mortgage ASAP and it enabled me to be a sahm and gave much more security when DH was made redundant. It's so nice having zero debt too.

No brainer for me. Mortgage payment all the way.

I did it on my first place and on our current house and didn't regret it at all. Certainly the first place and I think in the long run our current one will earn more than any investment, and it is great not to have that financial burden hanging over you. Yes, maybe there are more 'clever' things you can do, but they won't always be worth it.

Without going into details that will just bore people (and likely cause a few rolled eyes!), we’re very well set in terms of pension (maxed out annually with well/managed schemes that are consistently performing well), investments, savings etc. Very secure employment (well, as secure as employment can be!), with long service so redundancies would be decent and keep us going for a long time.

Long term, we’d like to retire relatively early and potentially do some adhoc consultancy (very possible in our industries).

I disagree with your last line. I haven’t asked for advice, I’ve asked for people who have made the decision to clear their mortgage if they’ve regretted it or not. I know what my options are and which one I’m leaning towards, I’m just trying to understand the impact it’s had on people who have gone down the same path.

Appreciate your post though- those are important questions when it comes to finances.

We paid off early (after 10 years). Not having a huge monthly outgoing hanging over us meant we could afford for me to give up work and start my own business. That alone has been worth it many times over, not necessarily in terms of making money, but the freedom to choose my own working hours, choose my own clients, etc., which almost overnight zeroised my work related stress and also enabled me the time to look after myself physically, i.e. daily exercise, and also stop the stress related over-eating etc. There's more to life than thinking solely about the financial aspects.

Yes. I'm a low earning lone parent. Glad it's gone.
The money went straight into teen driving lessons, also an investment.

We paid off ours in 2016. We paid off very early as sadly FIL passed away.

I am so so so relieved and pleased that we have paid it off. I have always had a fear of debt. I just feel so much more comfortable knowing it's ours.

I built a house

The mortgage got cancelled two months in was ridiculous (they said it should never have been approved it was a fiasco ))

I took some loans out
Got two jobs will on mat leave

And now two years later I have 50 k left on my loans which I hope to clear next Oct

I am exhausted

45 and will be happy to have no money worries next autumn.

I plan on working one day per day from next November fingers crossed and I will never put myself through this hell ever again

We downsized to become mortgage-free. It’s the most amazing feeling, to never have to never involved with lenders ever again.

Pay off your mortgage and then save whatever £ had been your monthly mortgage payment into a LISA or stocks and shares ISA.

My mortgage was due for renewal soon after Truss's disastrous mini budget, so I felt very lucky that I was able to pay it off in full then rather than facing a massive hike in interest and monthly payments.

Now I put the money I used to pay on the mortgage into my pension and a stocks and shares ISA.

Definitely worth it for me.

I recommend it, the feeling of security is unmatched in my opinion. It's enabled my OH and I to choose to work part time from our thirties because our outgoings are so low.

I think it probably depends which you value more security and safety and low stress or the possibility of higher/maximised financial rewards.

OH and I are quite frugal and easily satisfied in terms of stuff generally (drive a small, older, paid off car and don't see the point in upgrading, no expensive hobbies or holidays) and often struggle to think of things we want to spend money on so it was a no brainer for us, time was more important and paying off the house made that possible without all the worry of interest rates increasing etc.

If you have higher outgoings/are more in to all sorts of spendy things and experiences then I can see that maximising your returns makes more sense.

My kid is five and I've set up an account with a tenner a month now for his driving lessons, in the hope it'll cover things in twelve years!

We have a house which is worth significantly more than our salaries. Bought a fixer upper stupidly thinking we were investing in our future security by doing it up. Now we are likely to be taxed out of it.