To think it is best to pay off the mortgage early

[Orangeblossom78]

We have an endowment policy on the mortgage and it is due to mature at the end of next year. Just had the annual update and it is currently at a level to pay off the outstanding mortgage amount.

DH rang them to check and they told him if we wanted to clear it now there would be no extra charges to pay. We could be mortgage free next month.

I think this is a good plan however he says it is due to accrue around £15K possibly if we continue with it to the end of the plan.

AIBU? I think due to Brexit and uncertainty well, it may also go down and the projection is just that. If we paid it now we would already save over £6K in payments over the next year anyway, and would not have to pay any tax on any lump sum.

We were in this position in march. We had been over paying anyway because we were predicted a shortfall.
We had 3 years left on the mortgage, the endowment statement gave us around £8,000 more than the mortgage was.
The dilemma we had at the beginning of march was a possible no deal Brexit and the plan decreasing in value.

We decided to surrender the policy, and don't forget the surrender value will likely be higher than the current value on the statement, and pay off the mortgage.

We've now had nearly 8 months without a mortgage and the peace of mind is brilliant.

We are also putting the "mortgage payments" into a savings account

Brimful I am trying to show the OP that there could be several advantages to not paying it off immediately. By listening to people who's basis for a decision is 'its nice to be mortgage free' rather than facts the OP will be doing herself a disservice.

I totally get that and you have a great point!

But this is AIBU, not a financial forum so having a pop at us posters saying 'it'd be nice to be mortgage free'* is a bit daft. Coz it would be nice, in my opinion!

*Disclaimer: please seek professional independent opinions elsewhere.

The annual update states the endowment will pay off the mortgage, where does you DH get the £15k payout from?

Does anyone on here saying pay it off know the terms of the policy? Do they know whether there is a guaranteed maturity value that might be given up as a result of early encashment? Do they know whether there is a final bonus at the end? What about the life cover element

^^ This a thousand times over. By paying it off, the OP may be throwing away thousands of pounds for a few extra months of 'I'm mortgage free'.

It is baffling how obsessed with paying mortgages off people are on here. It's been years since 'you'll save thousands' has been a given and it is very unlikely that interest rates are going to shoot up any time soon. I get more interest just leaving spare money in my current account than I would save paying off my mortgage. Rushing to pay a mortgage off is far from the best solution for everyone.

We paid ours off early, but it was a repayment mortgage, so we saved by doing that, and dh (58) retires next month, so there was an impetus to get it done. It means we are back in UK with no debt, and owning our own house.

We had split our mortgage into two when we remortgaged...an interest only part covered by the endowment (which paid out and paid off that part of the mortgage about 8 years ago), and then the repayment part which we cleared over 2 years early.

We wanted the security of owning the house before dh retired. It worked for us. It's a lovely feeling looking at the bank account and realising that there is no mortgage to be paid out of the balance there.

We, for the life insurance element, kept our endowment policy going to term despite removing it from the mortgage, (we moved several times since inception thus remortgaging). We used the policy as a savings vehicle as I was a non wage earner. Once matured the proceeds were a handy lump sum for us that we otherwise wouldn’t have.

Dear god no, don’t dump your endowment with a year to go. You may get what’s called a ‘terminal bonus’ that is only added in full when it matures. I used to spend my days processing surrender and maturity values and the difference between the surrender value (what you’d get now) and the maturity value (what you’ll get in a year) was significantly different. The final years are when these policies accrue the bulk of their value. Mine is up in two years and I’m not touching it!

I wouldn't surrender based on what you have told us.
If you and your husband have got along together long enough to pay off a mortgage, and you don't agree, perhaps it's time for a conversation about whether the feeling of being mortgage free a but earlier is worth the additional money. I'd say not, but I don't live your lives!

Look carefully at the interest rate and wether loss of further acrural will cost you more or close to your savings over that time frame. Also what you do with your savings will have some bearing on value of paying off.

For us it makes more sense to keep savings than pay off the mortgage as our mortgage interest is so low that the savings on things such as insurances possible by having a large amount in the bank mean we are better off at present with a mortgage and savings than no mortgage and less savings.

For example: we could insure a pet at about £700 a year, but instead keeping £15k aside getting half a percent in the bank means most years we trouser £700 plus the interest. This works out better than saving 1.5% of £15k on the mortgage...

pay it off!!

i would kill to have no mortgage!

we could insure a pet at about £700 a year, but instead keeping £15k aside getting half a percent in the bank means most years we trouser £700 plus the interest

That's interesting (pun intended!). I've toyed with the idea of self insurance for pets for years and wish I had years ago but never had the guts to, but I never accounted for the interest I'd earn on the savings set aside to pay the vets fees that may occur.

But only getting 0.5% on your savings . Amateur. You could near triple that in a better instant access account or move the money to premium bonds if you've exceeded your personal savings allowances.

The weight off you shoulders of owning your home is worth a possible 15k .

your

I understand that people would kill to have no mortgage but OP, you could be saving say 5K of mortgage payments but losing out on 10K of extra value on the policy. Go to your endowment company and ask for a current surrender value, a maturity value and ask if the latter includes an estimate of any terminal or final bonus that might be due. Don't do anything til you have those figures in front of you.

And as another poster says, keeping it keeps the life insurance element in place for another year (and maybe any critical illness cover that you might have bought too).

The weight off you shoulders of owning your home is worth a possible 15k

Seriously? That's insane. People would seriously throw away £15k to be mortgage free a year earlier. . Even if the payout isn't quite as big as that, it's probably going to be thousands.

By not waiting until next year, you're effectively giving up a free luxury holiday of a lifetime, brand new car, or savings boost or whatever other item £10-15k would buy.

A big part of the value in paying off a mortgage is mental/psychological. We paid ours off as early as possible, and it's been wonderful knowing that our home is truly ours, free and clear.

However, if we'd stuck with our payment plan, it would have been many years before we were done, and it was well worth it to us to have that off our minds. The fact that it's only a year changes things, if you're likely to come out ahead, financially, by staying the course.

I'm with Barbara - it's insane to throw away the opportunity for more money.

Presumably the endowment can go down in value so it is a risk.

I wouldn't give up £15k for the sake of waiting a year.

I guess we have been paying it for 24 years so one more won't make that much difference! Yes the life assurance and final bonus are the sticking points. It seems it is not taxable either and we may use it towards some much needed home improvements.

plus its more difficult if you ever want to get a mortgage again , if you pay it off that is.

I doubt we would be able to get another mortgage, self employed and variable income. The plan is to possibly sell and be a cash buyer perhaps.

Is it the old-style mortages with an endowment vehicle and separate interest payments?

If so you can pay off the mortgage itself (if you have the cash to do so) and leave the endowment running. This is probably far preferable to cashing out the endowment early. That will probably incur significant penalties.

Those endowments are good investments generally because they are tax free. Why not keep paying into it and let it mature next year?

Does anyone on here saying pay it off know the terms of the policy? Do they know whether there is a guaranteed maturity value that might be given up as a result of early encashment? Do they know whether there is a final bonus at the end? What about the life cover element

Getting rid of debt is always a good thing.

And what about the life cover element? I don't suppose the OP and her DH are planning to pop their clogs next year, and even if they did, the mortgage has gone. You need life cover if you have a mortgage. Once you've got rid of it you don't need it unless you have very young children and few assets and want to have money for their upbringing. I don't have life cover, although my husband has it via work. But we don't need it.

Paying off our mortgage early was the best financial decision we ever made, not least because it made it possible for me to reduce my working hours massively And yes, I was able to do the same and now work freelance.