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

If emotionally it would be a big deal for you then sure that's also worth something. But it does not make sense financially, there are much better ways to get the most out of your money.

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

But that's the point. If the savings pay you more than the mortgage costs you, then you're better off having both of them rather than neither (if you use the savings to pay off the mortgage).

Now it's a weird situation right now, because while inflation is taking off, interest rates haven't caught up with it and returns on savings accounts, cash ISAs etc. are still terrible. But pp haven't mentioned increasing pension contributions as one options. Most pensions are index-linked, so assuming the OP's is, using the money to make additional pension contributions would mean that its value keeps up with inflation at the very least (probably the only safe way to do that in the current climate) - for which they'd be paying 2.75%, considerably below the current rate of inflation.

Or to look at it another way, the OP has mentioned wanting to get into investment. Depending on what form that takes they may need a cash buffer for security (if in BTL property for example, to handle unexpected contingencies). So even if they get a little under 2.75% on the savings it could still be worthwhile for the liquidity it allows in other things.

The point is: if as I suspect the amount of interest being paid is negligible, there's just no point in paying back the capital now, rather than using the facility you have to pay it back later and be able to do whatever's best (pension, investment, etc.) with the money instead. The risk with two high incomes is virtually non-existent, and it's hardly costing you anything.

If you have enough in pensions and sufficient savings to cover emergencies, etc then I'd say pay it off. Just ensure you keep some kind of revolving credit (I use a credit card and pay it off in full every month) to show you are continually credit worthy.

I say that as a financial adviser.

@BarbaraofSeville

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.

Exactly.

Or to put it another way: The question of whether to do it or not is probably not that important. It makes financial sense not to, but even if you do will will probably soon have sufficient savings to do whatever else you want anyway. Some people feel it makes "emotional sense" to do it; only the OP can decide whether they feel that way.

I think it would feel magnificent to pay it off.

What a wonderful position to be in!

I would leave £13k in savings and continue paying £80 a month.

We are significantly older than you, have 20 years remaining on a house that is frankly far too small. I will almost be at retirement age when it is paid off. I do not know how people can afford to overpay when raising dc as they have never ending needs.

The people saying to keep it, if you could earn more in savings/investments than you are paying in debit interest on the mortgage, are overlooking the reality that a mortgage is a loan secured on your house i.e. you can be forced to sell your house because of it. That is one of the aspects of the psychological comfort factor in getting rid of it, even if people just have a vague feeling it would be nice to be 'mortgage-free'.

@coodawoodashooda

I think it would feel magnificent to pay it off.

It really is.

Any tips on how to make it happen? I guess it is all about living quietly and overpaying as much as possible.

We were in the fortunate (to us) position to retire mid 40's and decided to keep the 20K remainder of the mortgage but drop it down to interest only over 25 years when we left work. We barely pay a thing but as we're retired would have no borrowing capacity otherwise. Very happy with our decision.

Paid my mortgage off in my late 40s. Best thing I’ve ever done.

@jkrfan

The people saying to keep it, if you could earn more in savings/investments than you are paying in debit interest on the mortgage, are overlooking the reality that a mortgage is a loan secured on your house i.e. you can be forced to sell your house because of it. That is one of the aspects of the psychological comfort factor in getting rid of it, even if people just have a vague feeling it would be nice to be 'mortgage-free'.

But that is almost certainly never going to happen because a sale would only be forced if you stop paying, which is quite unlikely for the OP as she has savings, the mortgage is only £80 pm, they have a good income and even if they couldn't work, then they'd use their savings to continue paying.

If the OP's mortgage was £2k pm and it was trapping them in jobs they hated or they had health issues, then paying it off would be a good thing, but not when none of that applies.

@coodawoodashooda

Any tips on how to make it happen? I guess it is all about living quietly and overpaying as much as possible.

First off DH is by MN standards a high earner, wasn't always but it has crept up incrementally.

We had a FD mortgage fixed rate, fixed term, on which you could make unlimited payments against once you didn't clear the balance before the end of the life of the package.

When we were really broke (and I mean broke we had tapas at home for my 40th on Nectar vouchers we had saved up and could only afford to invite one set of friends)(that felt like a low point)

I made sure we always had a couple of thousand behind us, but if for example if there was £75 left in the joint account on payday then I would sweep it in to the mortgage account.

DH has a FSP and then when he changed jobs a contribution fund, he also had two pension hangovers from when he was head hunted at the height of the tech boom, we asked for projections on these and realised that they were not going to payout a significant sum annually and we would be better off cashing them in and chucking them at the mortgage.

Once the main one was gone we borrowed another £40k for the kitchen and bathroom (which badly needed doing they were both here when we moved in and we have been here over twenty years we paid the guts of that down in three years. We continued to save what the mortgage was costing us and now have a healthy slush fund in PB's on which we are surprisingly getting a decent return.

DH works in an industry that pays an annual bonus sometimes quite good other times only £1,000 or so before tax, either way we would buy ourselves something small, book, new game, get a takeaway and then immediately stick the balance against the mortgage.

Historically in the last ten years we have made sure we have one decent holiday a year to Andalusia and flew club class , we are not acquisitive at all, our social life is at the rugby club and we probably eat out once a month if that.

We both drive second hand cars.

Not sure if that helps.

Any tips on how to make it happen? I guess it is all about living quietly and overpaying as much as possible
Exactly that
That’s how I did it anyway.
When I started to lose motivation I used the mortgage calculator about paying your mortgage off to see how much I was saving in interest. That always gave me a new spark to carry on.
Personally I made the right choice for or me paying it off when I did.

I guess that is what I'm doing. Still feels like a long way to go.

@coodawoodashooda

All of a sudden, it just gets a bit easier, then a little bit easier again, you kind of grow into the mortgage and yes you want it gone (if you are like me) but it does get easier.

If it helps my mother used to say stop moaning about the mortgage it is just rent on steroids.

[quote ThreeWiseWomen]@coodawoodashooda

All of a sudden, it just gets a bit easier, then a little bit easier again, you kind of grow into the mortgage and yes you want it gone (if you are like me) but it does get easier.

If it helps my mother used to say stop moaning about the mortgage it is just rent on steroids. [/quote]
Hahaha that's funny. I can just about see it getting easier. Im a single parent with an xh paying almost no child maintenance so am desperate to get rid of it.

I'm very jealous that you have a good income somewhere with such cheap housing!

We paid off our mortgage when it was down to about £16k. It just seemed a no-brainier when we were being charged 3% interest on the mortgage but earning nothing on our savings. It’s a fantastic feeling of security to know that you fully & completely own the roof over your head.

I would over pay over the next 26 months rather than use savings

Depends on any early repayment charges and what your interest rate is to be honest.
How are your pension funds looking?

Well done OP!
Look at the mortgage free chats on Martin Lewis moneysavingexpert website.
Great advice on there, and sure i had read that people leave a little bit on the mortgage if they need to be credit worthy etc

Pay it off. We had our first mortgage when we were 23 back in the 90’s. It was a small mortgage and we did the house up ourselves over 7 or 8 years (DH is a builder) extension, loft conversion etc. when we sold it we only needed a tiny mortgage to buy the house we are in now. With over paying and savings we paid it off in our early 30’s.

I sort of paid mine off about ten years ago - there's less than £100 o/s, about 50p a month.
When there was a lot of publicity recently about scammers falsely getting copy deeds and selling off other peoples houses, I heard it stated that it was far less likely to happen where there was a charge on the property,
So, technically still a mortgage, but I think of myself as mortgage free.

I paid the rest of my mortgage off last year, £25k. Savings are not earning much interest & I loathed paying interest on a mortgage I could pay off.