To pay off mortgage or not

[YogaMama66]

So I’d like to pay off our (pretty small) mortgage. Purely for the joy of being mortgage free. My DH says as it’s so small, (£350 pm), it’s a bad use of money and that I’m talking about using 12k each for a ‘feeling’. WWYD? I say you can’t put a price on a feeling of freedom! We’re both late 50s for context. Not high earners, but can afford a nice life. This just would mean so much to me!!

Would someone mind linking to the mortgage vs savings calculator please? I've had a look and can't find it. Thanks

They have other savings OP said.

Use the savings to pay part of the monthly mortgage fee and put additional money into your pensions. You would benefit instantly from tax relief.

It is the most freeing feeling , do it ! We felt liberated when we did it. Enjoy

I would! We are going to pay ours off this year, in our early 30s (probably get another mortgage when we outgrow this house though so not likely our last)

This. If you both lost your jobs tomorrow, being mortgage free means it’s not as big of a deal which is a great feeling.

We have done similar although not had anywhere near the return that you have quoted. But the 1% interest is due to end and we are thinking about paying it off.

@YogaMama66 have you got good pensions are you putting enough into those and gaining the tax relief, that and making overpayments may be a better investment?

If you were in the US on a 30-year fixed mortgage at a good rate, I would say definitely do not pay it off ahead of schedule; however, the short term, variable mortgage products that are mostly what is available in the UK have too much risk for me. If you have one of these, I'd pay it off.

When I make a contractual agreement, I want to know the exact terms through to the end. I think the UK has become complacent with the decades of low rates, but they were never sustainable and now we're seeing too many people who won't be able to afford their existing home anymore because of these variable rate products.

The utopia of cheap money at the end of the 20th and beginning of the 21st centuries is unlikely to be seen again for a very long time.

Sage advice from @dew141

We are doing something similar (although not seeing 20% returns), our savings portfolio has been working harder than our mortgage interest, therefore we are net positive.

You can spend £24k now but you could make more money by paying your normal amount and investing your money in other stuff.

The mental relief paying off a mortgage must be amazing but paying it off as quickly as possible doesn't necessarily mean you are making the best use of your cash.

Also it doesn't have to be all or nothing, you could overpay by £12k. The most sensible time to do this is when your mortgage term is up

Do it. It’ll be such a weight off your mind knowing the house is completely paid for, you don’t owe annything and you’re not paying interest on a mortgage - especially with all the interest rate rises.

I’m very jealous. I’d love to be mortgage free. I’ve paid the mortgage every month for 27 years and still owe more than I borrowed 27 years ago! 😔Get your tiny violins out for me!

I understand but I still paid off the mortgage. Why? Because I could have paid it off years ago but put the money in to savings and then lost all the money when the company collapsed.

The difference in interest rates wasn't worth it to me. It wasn't that much money, I'd rather have peace of mind.

Because I could have paid it off years ago but put the money in to savings and then lost all the money when the company collapsed.

Do you mean the bank collapsed and it was pre FSCS? I'd only recommend putting up to £85k per bank so you're covered by the FSCS and there's no risk of losing your money.

Although investing in the stock market is still a better option if you're willing to leave it there for five years or more. A couple of my funds more than doubled in value in a year. But that does come with a risk of losses so I understand it's not for everyone.

There's another thread going on this....

In short, if you've got enough easy to access savings to see you through an emergency, and if the interest rate on your mortgage is higher than you could get elsewhere, and there are no early-payment penalties, then pay off the mortgage. Or at least as much of it as you comfortably can. If not, then don't!

Investing in the stock market these past couple of years has been a total roller coaster ride. You’d be silly to put a lump sum in at the moment hoping to make 20%. You could take that gamble if you have an already paid-for roof over your head and your job situation is guaranteed. Most people aren’t in that situation though.

Another less risky option is to pay off the mortgage, instantly save all the interest payments for YEARS ahead, and use the money that you would have used each month to pay the mortgage to drip feed into a low cost tracker fund every month. If you fancy a nice holiday you could just pause the payments for a few months to put into your holiday savings.

As I said, it definitely depends on your appetite for risk and it needs to be at least five years.

I'd agree that 2022 was tough for investors in US stocks in particular. Although that was on the back of a long bull run and some big gains. U.K. investors also had a significant proportion of their losses offset by the foreign currency movements between the pound and dollar. The FTSE large-caps fared quite well last year as did some of the commodity-based funds.

Trackers are one option and they're lower cost but not necessarily lower risk, in fact, they're arguably higher risk as there's nowhere to hide in falling markets. Whereas an active fund manager has that option (to some extent at least) and can adopt some hedging strategies although you then have to pick the fund.

This is my line of work so I'm happy to do the research and make my own investing decisions. But even if you just picked one of the ready-made portfolios on the main investment platforms, you'd have a well-diversified portfolio if you're not so confident. And you should look at your overall portfolio in terms of cash v equities.

As I mentioned, I'm currently running individual courses to teach teenagers about investing. There's a lot of preconceptions about how difficult it is but if you're willing to have an open mind, the basics are not as hard as it looks. I've had some really interesting analysis of shares from 13 year olds.

Do this.
We don’t pay any interest but have the money available should we really need it

We don't have a mortgage and don't pay rent.

The freedom this gives is immense as we have low outgoings (even with the cost of living crisis).

Work is HARD, but knowing I could give it up is liberating.

Pay off your mortgage!

I paid mine off in 2018. It feels fantastic.

In that case I'd be tempted to clear it. There are better than 4% savings rates available but mostly only for smaller sums, 4% is at the higher end of what's currently available for a lump sum like that. You might get a better return in a stocks and shares ISA, equities etc but those options introduce risk and I think at your age I'd rather clear the mortgage.

I cleared mine yesterday. It was an interest only on a lifetime tracker at 0.24pp over the base rate and for a long time this was a bit lower than savings rates I could find so we just saved the money. Had nearly enough to match the mortgage by the time interest rates started rising.

We paid it off once we'd calculated that we would save £30k in interest so if you use one of these calculators online you can see how much interest you would save.,

@billy1966 what does that mean "the cost of holding the deeds?" thanks

When you purchase a house with a mortgage the bank holds the deeds til the debt is fully paid.

Then the deeds are yours.
Obviously you want the deeds kept safely so banks or a solicitor might be where you decide to leave them.

They invariably charge for the service.
It can be anything up to £500 a year.

So as long as you have a morgage, the deeds are kept safely in the bank.

Some solicitors will do it for free.

All depends.

But the deeds need to be safe.

Thank you