Meet the Other Phone. Only the apps you allow.

Meet the Other Phone.
Only the apps you allow.

Buy now

Please or to access all these features

AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

To pay off £13k mortgage?

209 replies

shookitoff · 05/04/2022 09:28

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

OP posts:
modernfemininity · 05/04/2022 11:03

Hello @shookitoff I have heard that property theft is a ‘thing’ that you are more at risk from if you have no charge (no mortgage) on the property.

Also I second the idea that at some point you could get a home loan to renovate which you might like, and the current mortgage company would be more likely to waive arrangement costs.

Today is the last day for a 2021/22 isa. Might it be better to put your money in there, knowing you can withdraw it anytime and pay off the mortgage?

May we ask - what is your mortgage interest rate?

Oh and - That’s useful to read thank you @longtompot.

Rosehugger · 05/04/2022 11:07

If it's on a variable rate I'd pay it off or overpay and pay if off quicker while the rates are low. Ours is 2.75% and we are overpaying.

Alondra · 05/04/2022 11:07

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

This is not true. You can borrow against your home equity which is why people still don't pay off their mortages when the interest rate is so low. My advice in this case will be for the OP to contact her bank and check if she can borrow against her equity without making a new application.

Aside this, none of us can actually advise what's best for the OP. It depends very much what she wants to do in the future against her present "pay it off and be free of it" mindset. Both are equally good action courses.

LizzieSiddal · 05/04/2022 11:08

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.

So by overpaying you’ll have paid it off by July/aug anyway which is 4/5 months away.

I’m not sure why it’s such a big deal for you if it will be paid off in such a short time. In 5 months you’ll be in the same position whichever decision you make.

longtompot · 05/04/2022 11:09

@modernfemininity happy to help 😊 As for the property theft, I can't remember what it's called but you sign up to the land registery so you get notifications if anyone registers an interest in your property. I read it in a previous post, the one about the vicar whose house was sold without his knowledge (it was in the news towards the end of last year)

TortugaRumCakeQueen · 05/04/2022 11:12

@LizzieSiddal

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.

So by overpaying you’ll have paid it off by July/aug anyway which is 4/5 months away.

I’m not sure why it’s such a big deal for you if it will be paid off in such a short time. In 5 months you’ll be in the same position whichever decision you make.

Only if they're over paying by £2500 pm, which I'm presuming they're not??
MyCommentWasDeleted · 05/04/2022 11:15

I would 100% pay it off in a heartbeat - I would love to be mortgage free in my 40’s.

Alondra · 05/04/2022 11:17

Actually my advice was wrong. You will need to do a new application to borrow against the equity of your home loan. It will be rubber stamped in the case of the OP when basically the loan has been repaid.

The only issue is whether the original loan is on a fix term. If it is, the new application will overwrite it and the new home loan will be on whatever interest apply at the time of application.

Nothappyatwork · 05/04/2022 11:19

@Alondra that’s not actually true in every case either every time I log onto my app pop-up comes up offering to allow me to drawdown against the equity on my mortgage I can borrow up to 10 grand no questions asked.

longtompot · 05/04/2022 11:20

I'm glad the info I found wasn't incorrect @Alondra

You can get something called an unencumbered mortgage on a property you own outright @shookitoff Maybe something to look up to see if it would be right for you should you wish to do some improvements in the future.

CakeAmbushAlert · 05/04/2022 11:20

@shookitoff Do you mind saying what your mortgage started as? I am also mid 40s, but we moved 5 years ago and now have a huge mortgage! We are overpaying but are years off owning our own home.

AllOfUsAreDead · 05/04/2022 11:21

@amusedbush

I wouldn't - I would prefer to just increase my monthly payment to cover that £80 and keep the £13k liquid.

And I say that as someone who (through very sad circumstances) has no mortgage, so I do understand the relief of owning a house outright! But £13k is a fair chunk of change and I'd rather have it available.

I'd be more tempted by this.

Whatever you can afford per month, increase the monthly payments to that. It will be gone in a few years and you'll still have your savings.

Depends really I guess too if you are saving for anything in particular or want to do any work to the house. If not, then pay it off in full now.

Sgtmajormummy · 05/04/2022 11:24

If you are thinking of selling in the next few years, do it. Then you’ll be free of any obligation to your mortgage provider.

I’ll explain.
Apart from the last house we’d always moved the mortgage on to the next property.
This time, with the mortgage paid off, we found out that the bank had an option on our house for another five years!
We had to rush around and pay for a waiver document from the bank in time for the sale!

BinBandit · 05/04/2022 11:24

We did with ours but technically we still have the mortgage but with a zero balance. That gives us the option to borrow the money again if we need to but not being liable to any payments.

What we did was use the mortgage payment we would have made (what the actual payment was plus our overpayment) and addhalf into DHs pension and the other half into savings. DH missed a few years pension when he was a stay at home parent so we basically wanted to increase this back up again now that we can afford to.

Sgtmajormummy · 05/04/2022 11:26

But do it anyway, it’s a great feeling to be mortgage free!

Eeksteek · 05/04/2022 11:26

Not really possible to answer (other than emotionally) without more info, but I get that you want perspectives while you mull it over!

How are you considering paying it off? By increasing your payments to £700ish a month and paying it by this time next year? Would that leave you miserable this year?

Or you have that 13k in the bank and are wondering what to do with it? Or something else?

What else might you do with the 13k? (if you have it). I see you have emergency savings, which is cool. Are your pensions on track for the retirement you want? If not, those take priority, the sooner the better. Are the kids educational funds enough, or could they benefit from being bolstered? If the kids are little, I would temporarily prioritise the mortgage. If they are late high school, I would not. Do you have any plans to move or do work on your house?

I’m assuming you have no other debt, from what you’ve said (otherwise that’s first to be paid). I had a finance agreement and no mortgage and then swapped them and it doesn’t feel any different to me (but then I’m very comfortable with a mortgage. YMMV) It makes no practical difference, as if you ended up in court defending a repossession, for any reason they would take literally anything else before your home.

I would increase the payment, if you can afford to, but I (probably) wouldn’t use savings to pay it. Interest rates and inflation are going up, so it makes sense to pay it down sooner if it’s on a variable rate. Or you could fix. I don’t think I would do that though.

If it were me, and I had emergency savings covered and if long term savings (kids’ ed fund and pensions) were on track for their goals (I bet they are. You sound very on top of it). I would have a lean year and pay it off ASAP. If it took more than a year, or doing that would make me too miserable or affect the kids too much, I would increase the payments to pay it in 3 years or 5. Whatever is doable. (I’m assuming your income is such that you can do this and still be somewhat comfortable, but I don’t know!). I wouldn’t leave it as a loose arrangement.

If I had the 13k in the bank, I would look at what interest I was getting. If I was getting more interest (fairly unlikely), I wouldn’t use it. I’d stop saving into it and increase my payments, until the mortgage rate was higher than the savings rate and then I’d pay it off. (But I wouldn’t have those savings in cash in the first place anyway). I’d probably look at spending half the savings on solar power and a battery (if suitable) and put the savings on energy into the mortgage. I would also look at a secondhand EV for day to day use and put the fuel/tax and insurance savings towards increasing the mortgage payment. This would save me personally about half the £700ish mortgage payment to pay it off in a year, and I’d increase my payments and go without a little bit (but not loads) to do that. I’d happily go without a holiday (or downgrade it) and cut down (but not completely out) on beauty, eating out, treats or a car or delay home improvements. I wouldn’t cancel my kids activities, but I’d be prepared to delay starting new ones, for example. After that, I’d drip feed the cost savings into pensions, kids’ funds and investments equally, unless the first two were already as good as they need to be. Then I’d just invest it.

I might also be prepared to dip into emergency savings a bit. If you have (say) six months emergency savings for essential bills, the mortgage would be part of that, so you won’t need so much in reserve if the mortgage is paid. It might pay to use some to reduce the obligation earlier. Don’t wipe them out, of course. But maybe reduce them a little.

There’s a lot of assumptions here. Maybe you have a north facing roof, or don’t use a car. Maybe your kids are babies, or maybe they’re off to uni next year. Or maybe they’re babies and you plan to educate privately. Maybe you lie awake at night worrying about the mortgage. Or the interest rate. Maybe you would be utterly miserable without monthly weekends away from a stressful job. Maybe your job is very secure, but stressful. Maybe it’s already looking rocky. I can’t know. There’s nothing wrong with any of those things, it’s just my assumptions and therefore what I would do are based on what’s important to me and what’s familiar to me. If I’ve got it wrong, then probably what I would do is not relevant!

cheninblanc · 05/04/2022 11:27

Mortgage free feels great. I'd pay it off

Dexy007 · 05/04/2022 11:28

I always thought there was a benefit to maintaining a very small mortgage, as it is easier to remortgage and release equity, or take out a home loan against the property than if you had no financing in place? It’s better for your credit rating too, I am sure, to be paying off a small mortgage than not. I might be wrong about that but I’ve heard it several times before!

jkrfan · 05/04/2022 11:30

Being mortgage-free gives a wonderful feeling of security. I would definitely recommend it.

HardyBuckette · 05/04/2022 11:30

I respect that you want to learn to understand investment after the mortgage is gone, but I do think at least looking into stocks and shares ISAs or something basic like that would be helpful at this point. Just so you could get an idea of whether you might be prepared to do that. If it's only ever going to be cash or mortgage I'd probably pay off the mortgage, but you might find you would be willing to consider something else.

Silkierabbit · 05/04/2022 11:32

I would definitely pay it off, its a huge relief when its gone. Though check no early repayment charges, sometimes its better to pay it as £1k a month or so to avoid those.

DdraigGoch · 05/04/2022 11:33

Given the current state of the world, solar panels would be a very rewarding investment at the moment.

Lightning020 · 05/04/2022 11:34

I cleared my small £18k mortgage in December last year it feels v freeing to be honest. I am 58 however so personally I am relieved as no spring chicken although keep healthy etc. My income is not the best so good to get shot of it (had cashed in a small private pension during the pandemic).

yellowsuninthesky · 05/04/2022 11:36

I would pay it off. You can then gradually build up savings and perhaps interest rates will rise a bit and make it a bit more worthwhile to save.

Being mortgage-free gives you choices and less stress if you lose your job.

I paid off my mortgage about six years ago. It has been a big relief not to worry about it, as it was a big chunk of our monthly outgoings.

Mooster62 · 05/04/2022 11:38

Whilst it is only a small amount per month it us mainly interest so still money down the drain. Pay it off and then put the £80 or whatever you can spare into savings or your pension where it is actually growing.