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?

I inherited some money and opted to keep paying my mortgage, and buy a rental, on the grounds you outlined, that I would never get cheaper loan than I had in the mortgage. I don't regret it.

Yes. The sense of security is worth any amount of notional lost interest.

We paid ours off early which meant I could go part time at 56. The difference it has made to us is well worth it. I’ve managed to continue working for a further 10 years which I would not have been if I had to work full time. It’s irrelevant if the most financially savvy thing to do would have been to keep paying it and locking the cash away.

We continue to pay our mortgage and have invested the money elsewhere. It has worked for us.

For me, having grown up in a family that started rich and got steadily less rich, losing our home when I was 16 after some really terrifying years, debt collectors at the door etc, paying off the mortgage was always going to be what I chose to do. Maybe if I were a real financial wizard I could have done better, but I’m not and having seen a much financially cleverer relative apparently get into trouble as retirement approaches, I don’t have a single regret. There is absolutely no privilege like having a home that (bar the Russians invading, civil war etc) nobody can legally take away.

Paid off early in our 50’s, no regrets, still working, now loading our pensions via salary sacrifice.

We had a chunky mortgage that we’ve consistently overpaid, and we will be free of it in about a year. Late 50s. Very fortunately we remortgaged just before Truss, and our rate is low. Neither of us has inherited anything although DH did pay off a big chunk with a major redundancy payment a decade ago.

We also have a small holiday house and paid that off early (no penalties). One less thing to worry about. I’m happy with our choices.

We paid off our mortgage on our previous house, then 4 years ago bought a ‘forever dream house’ and we have only 10K left on the mortgage which will be paid off early next year.
I will always choose to pay the mortgage off even though our pensions are shit - now after the mortgage is paid we will throw the money at our retirement.
Seeing both our parents make bad financial decisions, with repossessions and having to rent with no housing security has made us, me especially, place a huge emphasis on being secure and having somewhere to live. Even if we have no jobs we will have somewhere to live and that for me means everything.
I think (maybe stupidly) we’ll be fine as long as we have our house and maybe I won’t be able to afford to heat the house but I’d rather that than not be able to afford somewhere to live.

I paid mine off very early. I'm glad we did it. Now that same amount is transferred to our savings pot.

We paid ours off really early and ploughed the money into stocks and shares ISAs instead. We will be able to retire early 50s if we want to. As others have said, the psychological security and freedom has been immeasurable.

I don't always agree with him but as Dave Ransey says ..... if you really really hate being mortgage free you can always remortgage and get it back again 🤣

We paid ours off a few months ago and I'm so happy we did. We've had a fairly frivolous year in terms of spending - a couple of holidays, a new car (although the old one was knackered) and now I feel we're ready to be sensible again! Our kids will hopefully be at uni in a few years time and I see the 'mortgage money' as paying for that. I'm also starting, not before time, to get serious about my pension. But not having the mortgage is amazing.

Yes. It relieves stress and feels good. I did not put a price on these at the time of doing it so the decision was not rational but emotional.

However you need to be sure you are willing to do the work of "investing the difference " if you keep the mortgage. Not everyone wants to do that. If you do and enjoy, by all means keep the "cheap" mortgage.

They are schools of thought in the FIRE (= Financial Independence Retire Early) community who say it is better over time to rent lifelong and invest the difference between rent and mortgage (and the cost you save not having to maintain someone else's home) in the stock market. (Consult JLCollinsnh.com for more info)

No she won’t as the UK house has been her primary residence, unless it’s been many years since she moved.

I was 48 and husband 53 when we paid off our mortgage. Felt like a huge burden had been lifted. We invest now but not as much as the mortgage cost us each month. We have three holidays abroad now, it’s not the choice everyone would make but we wanted to plan for the future AND enjoy life now. It’s a balance and I think we’ve got it right for us.

We did it differently and directed a lot of money into pensions to save paying tax and for the pension pot to grow. Then used some of the 25% pension tax free lump sum to clear the mortgage and retire at 55.

I think this makes a lot of sense. We’re not overpaying mortgage but maxing out pensions and ISAs .

For us it was 100% worth it. We paid ours off in our mid-30s after we got some inheritance, would it have been better to keep it and invest? Maybe. But now we have peace of mind that if one of us gets sick/made redundant/dies we won't lose the house, and it meant DH could change his career to something he'd always wanted to do but was lower paid.

Yes we paid ours off early and helped our kids through uni to avoid debt

Thanks everyone.

I’ll read through the replies in detail but, from a quick scan, it seems like 99% of those who were in a position to clear a mortgage did so, and are happy with that decision.

It’s definitely heart over head for me on this one. I’m pretty financially savvy (pension maxed-out, investments actively managed) but I just think the relief of no longer having a massive mortgage payment every month will be worth it. We’re lucky that we’re able to pay the mortgage we have and have a lovely home, but just seeing that chunk of money going out every month always makes me panic slightly.

Yes, I paid mine off 20 years ago with an inheritance, I balanced it up and there was enough to keep an emergency savings fund and pay the mortgage off. It was an excellent financial decision for me at the time.

we paid off the mortgage on another house with partner with his redundancy payment, which took the pressure off when he took nearly a year to get reemployed. We had enough to live on.
i now have a joint mortgage with partner which we will pay off in March, have the money set aside just waiting for term to end. It will insulate us from mortgage rate stupidity and we will also have savings.

but you have to do what is right for you. Partially paying off then keeping some savings might be the way to go….

I was on a base rate tracker of 0.18% over base rate. For ages I was just saving overpayments versus paying it off. But at some point I just thought let’s clear it. I have never regretted it

It was worth the loss of interest.

Similarly I could have got a masters loan but I had the savings. I probably would not have ever had to repay as I went part time at work and pay tons into my pension. But I didn’t want to be bound by that loan to effect my future decision.

We cleared our mortgage as early as we could. Since doing so we invest what would have been mortgage payments. Perhaps we would have made more money doing things the other way around, but owning your home outright is a very nice feeling and we have made good returns on our investments so happy with the decision we made.

Depends C on your age, but I’m intending to do the opposite! Mortgage has been paid off for years, would have been better to ‘gear up’ and buy more properties, but exh was cautious. Now intend to do equity release and spend/give away money to DC so as to leave minimal inheritance.
Can’t understand elderly people like my friend’s 94 year old mum live on the ground floor of a huge mortgage -free house while her daughters and grand children (all working) struggle.

Paid off about yen years early, kept putting the same amount into savings and investments. Used some to pay in full for an extension so ND child could live with us , but independently.
One of us became ill and couldn't work so was able to manage that with no 'change in lifestyle'. Other was able to go part time and then retire early.
None of that would have been an easy decision with a mortgage.

We have probably not had as many new cars ( ok none) or foreign holidays as some of our friends but It was a lifechangingly positive decision for us.

We did do the 'investment is better' maths before doing this and it was fractional at that point, also many of the 'invest' options used the word IF about predicting the future, most of which turned out not to be the case.