To pay off £13k mortgage?

[shookitoff]

We’re both mid 40s, have overpaid mortgage for years through increases in salary and saving. It has £13k left so payments are about £80 per month. This is obviously really affordable but on an emotional level I’m drawn to the idea of paying it off in full and being mortgage free.

Any advice? Has anyone fully paid their mortgage off and do you feel it’s worth it compared to having a small mortgage?

Thanks

I'd just up the direct debit to £500pcm (or whatever works for you) and let it pay off over the rest of this year. It would frustrate me paying as little as £80pcm (unless I was bare bones skint), and seeing it dwindle slowly.

I’ve overpaid and have a similar amount to you to pay off. I could afford to pay it off in one go but would prefer the savings for now.

I am to pay off in next 4-5 years though.

The £80 per month is what we have to pay but we’ve been paying much more than this in overpayments. If we kept up big overpayments we could have it gone by the summer. I was just thinking about reasons to stop overpaying at this stage and keep a small mortgage. Thanks for all the perspectives and suggestions.

We did the same. Financially it would have made sense to invest the money elsewhere as would get a higher return than the mortgage was costing us. But….the feeling of paying off the mortgage was overwhelming so we did that, it was the best thing we did

We are similar age and paid ours off at the start of the year. It's brilliant! Get it paid off and breathe a sigh of relief

I paid mine off and it gives a sense of security. It also gives me the option to drop to part time if I want as I don't need to pay the mortgage. It didn't make financial sense to do it at the time as I was making more on my savings than on the interest on the mortgage but it was worth it for the piece of mind and added flexibility.

@shookitoff

Thanks for all these perspectives. The only thing I can think of us doing to this house is redoing the kitchen but we would likely save for that rather than borrow. The mortgage would have 18.5 years left on it. Through a complicated set of circumstances our earnings majorly increased a few years back and instead of lifestyle inflation we threw huge amounts at the mortgage each month.

Your loan at the moment is an overdraft with a very low interest rate. Many people who don't pay off the small mortage is because they can borrow against it with the cheapest interest there is. I have friends who have bought new cars and borrow it from the mortgage - a much smaller interest rate than any other type of loan.

It really depends on your circumstances and what you may want to borrow in the future.

I think there’s enormous psychological benefits to being mortgage free but personally I’m not gonna do it, I’m putting all my money into my pension. HPI will take care of any interest i pay on the mortgage. More tax efficient

Based on your post and updates I think I would pay it off and be mortgage free. That is just so appealing to me, personally.
You say you have other savings for rainy day/emergencies so unless you have a burning need to renovate your properly with th 13k I would pay off the mortgage.

Congratulations btw 💐

If paying it off will still leave you with a comfortable emergency/savings fund then the rational and emotional thing to do is pay it off.

But maybe do something meaningful with that £80 a month - a special fund for a good weekend away, donate to charity, whatever.

Assuming you have no other savings, I would keep the money and overpay, aiming to pay off the mortgage in the next few years.What if your house needs a new roof? Or several big appliances break in a short time? You need surgery and the NHS waiting list is 2 years? I would want the buffer.

Pay it off. You can keep the mortgage balance at 0 and still have the right to borrow on the property if you want to, at least with some lenders.

If your financially sound/no debt and some other savings for emergencies etc I absolutely would pay it off.

I’m busy over paying our mortgage as we bought in late thirties I want it gone by mid fifties at the latest.
Yes I know pensions/investments/ savings can be better financial sense but for me it’s the security of having a roof on my head no matter what. I have a pension through nhs and partner is local government. We save too and no other debt. I’m not putting everything into a retirement I may not get ( my mum died early 60s)

@JustHereWithMyPopcorn

The only reason not to is in case you need to borrow any more money. The mortgage is the cheapest loan you’ll get.

it is secured on your home though. At a certain point in your life you may prefer the security of knowing the house is yours and taking a non-secured loan at a slightly higher interest rate if needed.

Ours was paid off a long time ago (we are late fifties) - we have never borrowed anything since, as we then built up our savings to a level that we could cover replacement cars, house updates, holidays etc, plus top up pensions.

I would suggest just keep on paying the high monthly amounts (so the 13k stays in bank) then, once mortgage is clear in a few months, using the freed-up money to increase your savings and/or pensions. We too paid mortgages in the 15% era, and I remember how hard it was.

I'd invest in solar panels and insulation if you are planning to stay there long.

I've just googled to see if there was any info on the pros and cons of doing this and found this. It does say

Historically, leaving a small amount of money outstanding on a mortgage meant that the lender kept the deeds for the property somewhere secure, but nowadays, deeds for the majority of properties are no longer required in paper format – records are now held electronically by the Land Registry.

On top of this, leaving a nominal amount on a mortgage in the past made it easier to borrow from an existing lender. However, the impact of the recession and the tightening of affordability criteria mean that any new line of credit requires a separate application with new credit checks, regardless of the lender.

www.uswitch.com/mortgages/guides/paying-off-your-mortgage-early/

I paid off ours about 7 years ago. It was the biggest relief of my life to know that come what may we have a roof over our heads that no-one can take away from us. No landlord can chuck us out over unpaid rent, no mortgage company can knock on the door.

Yes, it's worth it!

Given your attitude to risk, I'd pay the mortgage off then set up a DD to pay the monthly £80 into a ISA invested in something like Vanguard Lifestrategy, with a view to increasing that if and when you feel a bit more comfortable about it all.

@shookitoff

We would have about £20k in savings left plus some savings for the kids education.

Then I would definitely pay it off and put back £100 a month into the savings pot.

Pay it off. We paid ours off and recently got a new quite small mortgage when we moved. It's so frustrating dealing with the bank again and having to remortgage etc. Yes it's not costing you much in interest. But cutting the bank out is great.

You have to approach these decisions in the context of a proper financial review. There are pros and cons and without knowing all about your financial position no-one can give you good advice

We've been in this position twice. The first time when I was on maternity with DC1 16 years ago, we paid it off (actually left £1on it on the advice of the mortgage lender so we could borrow back on that particular mortgage again in the future- it was a great deal). We subsequently bought another bigger house 10 years ago (30%mortgage due to large deposit after paying off old mortgage early and savings) and are now in that position again.

However, this time we owe £30000 and I'd love to get rid of it again (won't be moving again), but if we paid it off now it would make a serious dent in the savings and we don't feel comfortable in the current climate to risk getting rid of over half our savings. So I think we'll continue to chip away at it with extra payments each month and pay it off maybe at the end of the year/early next year depending on how much more we can save before then.

Sorry, I didn't mean that to be so long-winded! Basically, for us, the decisions have been based on how much of our savings pot will disappear and the current climate (job safety, bills massively increasing etc).

With current inflation rates, YANBU. I would do it.

Retired Bank Manager here.

Yes, given what you've said here, I would pay it off ASAP.

You haven't given a lot of info, buy with the figures quoted, it looks like you have about 19 years left on the term. You're sitting on standard variable rate, which isn't the best - it's usually about 3.5%. This means you're paying about £37 interest a month, so your capital is only decreasing by £43 per month. If you carry on like this, for 19 years, you will pay just over £5200 in interest, meaning you will pay around £18k.

If you keep the £13k in savings, the way things are going you will most likely only earn 0.01% interest on it, which equates to 10p per month.

So for me, it's a no brainer. Pay it off. You will still have £20k left for a rainy day. If anything happens down the line, where you need access to a chunk of money, you can remortgage - and at a better rate than standard variable!