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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

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Original poster

That sometimes its best not to pay off a mortgage

21 replies

counstropular · 21/01/2011 18:22

Do you see paying off a mortgage as a priority? I have enough to pay mine off in one hit but at the moment the monthly payment is so low it would take forever to save the amout of free cash I have. (kept for investment)
is it silly to think sometimes you are better off not paying the mortgage off or aibu?

OP posts:

activate · 21/01/2011 18:25

mortgage rate of interest higher than investment rate of interest pay it off

the opposite then don't

simples!

onceamai · 21/01/2011 18:25

Depends how secure you are in other ways and how much you are talking about. I'd certainly take a gamble on the stock market at the moment in you shoes but certainly not with all of it.

activate · 21/01/2011 18:26

or convert to an offset mortgage if similar

Rubyonthetown · 21/01/2011 18:28

If its really low then the interest you're paying is low too. They say its the cheapest way of borrowing money, so if you wanted to do some house improvements for example you could borrow it that way by keeping it open.

Someone told me that years ago.

thrifty · 21/01/2011 18:49

activate has it right, i reckon. if you've got a fab interest rate on your mortgage (less than 1%) then it would be better to earn interest on your money as you can get short term savings rates of upto 4%. if the interest rate on your mortgage is more than the best interest rates on saving, then pay it off. if you have a huge amount of money, you could use to to imprve the value of your house as ruby suggests.

lal123 · 21/01/2011 18:54

and you also have to remember that if you pay off your mortgage you don't have access to savings?

orangepoo · 21/01/2011 18:59

Why don't you pay some of your mortgage off if you are unsure. If I was in your position, I would pay the mortgage off, definately. Mortgage = great big debt which entitles someone else to have a claim over your property. A necessary evil for most of us.

Anyway sometimes, the mathematics of it imply that you shouldn't pay it off. However, I look at it from a security point of view and would therefore still pay it off. That may be because my uncle's house got reposessed though and also MIL and FIL nearly lost theirs.

countstropular · 21/01/2011 19:02

Its not a huge amount but would take ages to save again.

eviscerateyourmemory · 21/01/2011 19:08

I would pay it off, or convert to an offset mortgage so that you can go into debt again if needed.
Or if you feel that the amount that you are paying in interest each month is a worthwhile spend for the flexibility it buys you then dont pay it off.

lesley33 · 21/01/2011 19:39

I would keep some savings for a rainy day, and use the rest of the savings to pay off the mortgage. If you can have it, some savings is very useful for emergencies e.g. boiler breaking down.

In reality it is difficult to make more in savings in interest (remember you have to pay tax on interest) than you pay in mortgage interest. So unless you have an incredibly low mortage interest rate, paying as much of your mortgage as you can, will save you money.

Also a great feeling to know that you have no debts.

tuggy · 21/01/2011 21:46

The answer to your question is very simple.

If you are PAYING a higher interest rate on the mortgage then you RECEIVE on your savings then pay it off.

It doesn't matter that it will take a while to re-save it, it will save you money and long term you will be 'richer;

MadamDeathstare · 21/01/2011 21:52

This reply has been deleted

Message withdrawn at poster's request.

SkyBluePearl · 21/01/2011 22:55

I agree with tuggy but at the same time would be desperate to pay off a substancial amount, put some into an account for rainy days and maybe get something small you need. Have you anything you need to get?

mamatomany · 21/01/2011 23:21

Depends if you are paying tax on that interest too, or capital gains on any investments.
I want rid of ours asap if inflation kicks in savings won't be worth holding in cash anyway from what I can gather.

ccpccp · 22/01/2011 08:19

Unless you are brilliant on the stock market, paying off the mortgage is a sensible way forward.

Being mortgage free is one of lifes milestones :)

If you like the idea of having funds you can dip into though, you could move to an offset mortgage and keep more in the savings pot than you owe. Its the same as having paid off the mortgage, but the money is still yours to take out if you see an investment opportunity.

Cribbage · 22/01/2011 08:35

Oh how I would love to have this dilemma
If I did though, I personally would pay the mortgage off as it would be a huge weight off my shoulders. I'd probably do what my DSis did and leave a small amount owing - I think it was £100- which avoided the repayment fees but also means she has the option to easily borrow again should she wish to.

StealthPolarStuckSpaceBar · 22/01/2011 08:40

I'd love to pay ours off - we are currently saving llike mad in the hope it will be gone by the time we're 40

"lesley33 Fri 21-Jan-11 19:39:00
I would keep some savings for a rainy day, and use the rest of the savings to pay off the mortgage. If you can have it, some savings is very useful for emergencies e.g. boiler breaking down. "

but surely if you've paid it off you have a huge mortgage payment you're not paying each month that you ould use for thissort of thing? If we were ever mortgage free th monthly payments we then wouldnt make would cover most emergencies!

CoteDAzur · 22/01/2011 08:44

What activate says.

If your mortgage is 3%, YANBU to not pay it off but buy 5% corporate bonds instead.

Then again, you run the risk of:

default on the bond (because no investment that yields more than your mortgage will be risk-free)
higher rates in the future
unforeseen future events (otherwise called "peace of mind" factor)

So it is a personal decision that has to do with your risk preference.

Chil1234 · 22/01/2011 09:01

YANBU... I used to work at a building society with someone who had a low-rate staff mortgage. She was approaching retirement, had no husband or children to think about, and had no intention of paying it off. Her rationale was that she might as well keep borrowing at the low rate, enjoy the cash, and when she died her relatives would use the sale of the house to settle the debt.

It's not a rationale I would follow myself. As I have child that could be going to university in seven or eight years' time my aim is to get rid of the mortgage by then.

WestYorkshirePudding · 22/01/2011 09:08

Our mortgage is very low (DH bought at the right time, we've virtually renovated the house, blah blah) and whenever we get any money given or have saved some we'll pay a small chunk of it off. I'd hate to pay it all off and have no savings left.

The only thing ias that the mortgage is so low that when it does get paid off in 10(ish) years time, we won't suddenly have this huge lump sum every month like most of our friends will. Some of them have payments in excess of £1000 every month!

Now that would be nice...

countstropular · 22/01/2011 09:20

Thanks for the advice.
We have been mortgage free before on two previous houses but now just have this small amount left...which we could pay off now.

Its a matter of losing the safety net and possible amount for a deposit for another property or business) or paying it off and knowing that isnt there any more.

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