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AIBU?

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Original poster

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:
Gilly12345 · 05/04/2022 14:18

We paid ours off a few years ago as it was so low and it was the best thing to be debt free.

We still are debt free and now have built up our savings and do AVCs with our pensions.

CoastalWave · 05/04/2022 14:19

@LndnGrl

I'd pay it off and be done with it, you never know what can happen in the future.
Exactly WHY you shouldn't pay it off.

As you don't know what the future entails, if you ever needed to get hold of money fast, the quickest way to do it is to borrow against your mortgage (rather than having lots of money tied up in your property which presumably you don't want to sell)

I've had numerous financial people saying you should always keep a small mortgage for precisely this reason.

CoastalWave · 05/04/2022 14:21

On another point, how on earth do you pay off £153k off a mortgage in 6 and a half years?!

Soontobe60 · 05/04/2022 14:23

@shookitoff

Thanks so much for the replies! I can see it’s almost half saying pay it and half saying don’t! We do have savings so no issue there. Interest rates are so low the mortgage costs us more in interest, though not a huge amount. There is no repayment penalty as it’s on a variable rate.
When we paid off our mortgage, the feeling of relief was immense! We only had 20K left to pay, but even then we saved a fair few £1000s by paying it early - far more than we would have gained in savings interest. All I would say is, do you have plenty in your pension pot? If not, maybe divert more money there now as it’ll pay dividend when you retire.
Soontobe60 · 05/04/2022 14:25

@CoastalWave

On another point, how on earth do you pay off £153k off a mortgage in 6 and a half years?!
To be fair, my DD and her DH saved well over 200K in that same amount of time. They both earn over 100K.
Caspianberg · 05/04/2022 14:28

@CoastalWave - have a low 20 odd year mortgage, and then pay off £2000+ per month so it’s paid off quicker?
It’s what many people do to reduce term, or reduce monthly payments before having children/ childcare costs.

Ie mortgage £500 a month
Pay £2000 a month for 4 years
Then either back to £500 and it’s paid off quicker, or you can drop to £250 a month as you have already overpaid lots.

Fifteentoes · 05/04/2022 15:40

Look at your mortgage statement and see how much interest you're paying, and how much capital. This far in with such a low balance left at that rate, the interest payments are probably next to nothing.

In which case, there's really no reason to pay back the capital, when you could have the money instead to spend on other things, invest for a higher return than it's costing you, or whatever. And it's not like the amount hanging over you is a serious risk when you've both got good jobs. Keeping the gas and electricity connected would probably be more of a concern if you suddenly fall on hard times.

I've never understood the whole "emotional" significance of being mortgage-free. Something either makes financial sense or it doesn't, and our lives are enmeshed in all kinds of financial factors and obligations.

2DogsOnMySofa · 05/04/2022 15:51

I was always told that a mortgage looks good, and helps with your credit score. If you're not paying too much in interest, and it's only £80 a month, I'd keep the money and continue to pay the mortgage

Orangello · 05/04/2022 17:25

I've never understood the whole "emotional" significance of being mortgage-free. Something either makes financial sense or it doesn't, and our lives are enmeshed in all kinds of financial factors and obligations.

Same here. So OK you own the house. If you have no savings due to putting all your free money in the house, it's still not great when you suddenly need some extra cash.
Put the extra money where it makes money instead.

Blossomtoes · 05/04/2022 17:35

I've never understood the whole "emotional" significance of being mortgage-free.

I guess you have to be in that position to understand it. It was the climax of my property owning life. A lot more exciting than buying my first house.

irregularegular · 05/04/2022 17:35

Actually a wider issue is that once mortgage-free, I would love to go part-time (as many pps have said) or take some periods out from work as I've never really had the chance to do this. Our current income isn't really sustainable as I don't want to be full-time in my current profession longer term. Surely £80 a month isn't going to be making any real difference to whether you can go part-time or not, given the income figures you gave??

AlmostThereMaybe · 05/04/2022 17:58

No. Having a small mortgage should make it easier for me to borrow money if needed, and I also have an insurance policy that is linked to be mortgage term that could be useful if I’m unlucky enough to be struck down with bad health.

CurlyMango · 05/04/2022 20:30

Paying off the mortgage is brilliant. AIds the whole mental load and is an amazing feeling.

jgjgjgjgjg · 05/04/2022 20:35

Not unless you have maxed out your pension contributions this year and for the last 3 years. You will get a much better return through that than the very small interest rate you're paying on your mortgage.

Bunnycat101 · 05/04/2022 21:21

I wouldn’t personally as the amount is relatively small. It’s a different kettle of fish if your tied to paying thousands a month.

You could be getting tax relief on the £13k either via a pension or LiSA and investing. The security of having access to capital has a value in and of itself.

DdraigGoch · 05/04/2022 21:33

@CoastalWave

On another point, how on earth do you pay off £153k off a mortgage in 6 and a half years?!
I'm on my own, at the top end of the basic rate of tax. I pay about £12k a year (most of which is overpayments) which must be what the OP and her husband would roughly be paying each. So it's possible, and while the OP's household has the additional expense of kids, presumably one or both of them earns a fair bit more than I do.
DdraigGoch · 05/04/2022 21:36

OP, you've said that both of you have a workplace pension, but are you getting the most out of it? It's a very uncertain world so it would be worth paying in the maximum allowed additional contributions to ensure security in old age.

Eeksteek · 05/04/2022 22:01

@Abetes

I was about to pay off my mortgage about 5 years ago but the building society wanted to charge me £300 early redemption fee and something like £250 to get the deeds out of the safe and return them to me. So I paid it down as low as I could without either of these kicking in. I now pay 21 pence per month. It makes me laugh every time I see it on the bank statement. I still get all the standard letters about how much I've paid in the year etc and informing me of interest rate changes so it costs them far more in postage and admin than they get in interest.
When I say pay off, this is what I mean. You don’t have deeds cluttering up the place (they’re a right pain to file) and you can ask for a further advance on the mortgage more easily than applying for one.

A few people have mentioned that mortgages are the cheapest debt you can get, which is true. But the aren’t cheaper no debt, and they don’t pay you, which savings do (or at least should).

themindwonders · 05/04/2022 22:09

Do it, we been mortgage free for just over a year now and I'm still only 39.
The mental relief is amazing and we still save some of what our mortgage was (rest goes on the DH mid life crisis car)

Ikeptgoing · 06/04/2022 07:37

You'd be daft not to pay off your mortgage in your situation . The interest rate as it's over a long term means you're mostly paying interest when you don't need to. Why would you continue giving away that money?

Financially it make sense to pay off the mortgage and either save or invest the £80 month you no longer use for mortgage payments. You can still continue to save into your other savings as even with this mortgage you've been saving. I'd keep the amounts separate, one for normal secure savings and one for moderate or low risk investments or simply a savings account that is high interest as you can get but may mean you can't withdraw for fixed period.

That's what I'd do.

notanothertakeaway · 06/04/2022 07:51

If you have income £6,500 per month, I would pay off the mortgage (it's liberating) and then save hard to build up more savings, taking advice from a financial advisor

Silkierabbit · 06/04/2022 08:00

I did get diagnosed with cancer late 40s in November requiring a years treatment (4x surgery, chemo, radio, hormone tablets etc) and it was a huge relief to have mortgage paid off and no need to work through it. The money I have put in pensions though you get tax relief which is great was totally inaccessible and if prognosis is poor only thing I can do is reallocate it to others after my death and state pension is lost. Though state pension NI contributions also cover some benefits like ESA so are worth keeping. Last thing I would want to do is take a loan when no income coming in though if you keep say £100 in mortgage it might help get a loan if you think you ever might in that situation. I was able to save more once mortgage paid off and that was perfect.

Its a challenge with savings atm as interest rates are low but suspect they will rise and mortgage rates are higher than savings rates so makes sense to pay off. I have some in investments as well, though they have been volatile recently with Ukraine war and are more for long term. Too old for a lisa but use SSISA.

gingerknobs · 06/04/2022 08:01

depends…Are you on track for a cosy retirement?

Say you saved £3k for an emergency fund in highest rates account possible, then had £10k left you could put in to your pension which immediately earns you £2k in tax rebate for double that perhaps if you pay more tax…or you might save £200 in interest from a large overpayment on the mortgag

Mortgage isn’t always the right thing to ‘invest’ in.

BarbaraofSeville · 06/04/2022 08:07

Are the people saying how much paying off the mortgage means missing the fact that its £80 pm with a fairly low interest rate and they have an income of £6k a month?

They're barely notice the difference in their finances, and little will change in terms of whether they'll be able to afford to save/invest more or flash cars/holidays.

Yes they'll save a few quid a month in interest, but they could get tax relief of 20/40% and likely higher investment growth over time if they put the money in a pension instead. Far from saving interest, but in reality throwing away a significant amount of money instead.

CharSiu · 06/04/2022 08:11

We over paid ours and then paid it off in full in our mid thirties but that was because of an extremely high risk investment doing well.

Pay it off.

The number one rule with investing is decide is on the level of risk you are prepared to take. It’s long game play, overall DH and I have done very well as small investors.