AIBU in thinking no point in being mortgage free

[Tunaormayo74]

My husband and I want to be mortgage free and could pay it off when we are in our 50s and 60s respectively. However, I don’t see the point. All it means is that we will have less disposable income now but no better off when we retire. The only way it makes sense is to downsize when the mortgage is paid and use the equity to afford holidays, etc but why not enjoy the holidays now rather than when we are older? If we stayed in the property we are working hard to pay off the mortgage for, all that will happen when we died is the government will take a huge chunk of the equity in inheritance tax.

Am I being unreasonable to think there is no point in paying off your mortgage early if it means you’ll be in your late 50s or over?

But then his widow got 4 x salary as a lump sum and didn't need to use it to pay off the mortgage. Surely not that bad.

It's a good point OP. DH and I are trying to work out if we can afford to send kids to private school atm (they're 6 and 8) and eldest would potentially start in 2.5 years. This would mean us not overpaying our mortgage which would mean it's paid off when I'm 64 rather than 55. But at the age of 55 we can't retire anyway so although it would be nice to not have that additional monthly cost, it doesn't feel like a huge deal to have it paid off earlier.

Catspyjamas17 - Bodenesque says she lost her death in service benefit as well. So no lump sum payment for her. They're usually linked to being in the pension scheme.

Yes, it depends how important the above is to you. Everyone is different. I agree with @loislovesstewie .

I would rather forgo holidays and have them later as I don't think holidays are important. If you do, then don't pay off your mortgage.

I think there's such a great relief once the mortgage has been paid off. It means if the worst happens you still have your home.

We over pay (and still have holidays) and it should be paid off before I'm 50. It will mean we can help DS and maybe go part time. I wouldn't want a mortgage in my 60s. I think that would feel risky although accept that people don't often have a choice.

Seriously @Tunaormayo74 you should see an independent financial advisor. A good one (like ours) will explore your hopes and dreams for the future and how to spend and invest both short and long term.

You are talking as if you have to choose between some kind of hedonistic lifestyle now and paying (over paying) a mortgage.

Can't you do both?

At it's max when we were paying ours, it was around £800 a month. On a joint 6-figure income, we managed to overpay it and also have holidays (not really expensive ones - as that's not our thing) and pay for 2 kids at uni for 7 years.

We paid it off when we were mid-late 50s. We could have moved upmarket further but a) didn't see anything we liked and b) didn't want another huge mortgage. When we inherited from one side of the family, we passed most of it to the DCs towards buying houses.

TBH it didn't change our lifestyle at all. We saved most of it.

You should also factor in any likely inheritances you may get, if your parents are alive and own property.

As someone else said, you are missing out the part of your life between retiring and dying - and provision for it.

You need to look very carefully at your pension and how they will be valued in 25 years and if they are index linked.

You also might want to look at private medical cover which for me is worth more than a holiday and which we've had for decades both through work and now in retirement.

It will when you have them at Uni.
My DD student loan didn't even cover her rent and bills.
Being MF meant it was such a struggle.

If you pay it off quicker you pay less interest. I've overpaid for almost 9 years now and I've taken over 6 years off my mortgage end date. I've only overpaid what I can comfortably afford without leaving me short for general living and holidays. In my view the quicker it's repaid DH and I will be over a thousand pounds off per month. We can do other stuff with that money.

Isn't it really 2 different discussions

First is saving versus spending now. Yes some people do drop dead on retirement day. But even if I did, I'd have spent the previous years happy I would have a nice retirement with income to spend. That's worth alot.

Then it's -I shall save money - do I use that to over pay mortgage or invest (I did second when my mortgage was base rate +0.15%) or push it into pension due to tax breaks and employers matching (if they do)

But the second discussion can only happen if you are happy to sacrifice now for future options)

(Other things that help -no kids and also only buying one place and not keep trading up/extending mortgage-easier to do without kids of course)

It is all about balance.

Don't stick every penny into the mortgage at the expense of life or pensions.

Maximise any employer pension contributions first
Stick some money to the side for fun money/ holiday money
Overpay the mortgage.

We have overpaid the mortgage and looking to be done in 4 years when hubby turns 50 and I am 44. We started at 260k in 2014 so will have paid it off in 13 years all being well. We do though also have holidays and days out with the kids - we do though prioritise experiences rather than expensive clothes and beauty treatments.

Once the mortgage is done then we will redirect the overpayment so additional savings for a year or so (currently pay 1500 a month mortgage) and then may drop my hours at work a bit.

Wasn't!

Debt is not taxed but equity is. Inheritance tax is on the net value of the estate.

So you have zero savings?

On reflection, I think what is really bothering me is that we will likely have a rather large estate when we die. With only one child and given inheritance rules, a lot of that hard work building up that estate would have been for what?

I get the social responsibility and that it will be used for those less fortunate but working so hard now to build up net equity only for it to be taxed away.

I get that I’m being unreasonable but there is something about working hard (even if striking a good balance) to build up assets that one never really get to use or enjoy.

We paid off our mortgage about 6 years ago. We are both late 50s. It was the best thing we did. I was diagnosed at the time with a life threatening illness and was unable to work and I only work part time now. I wouldn't want to be paying a mortgage after retirement age especially if you haven't got a good private pension.

I’m not sure I understand your train of thought in relation to the point I’m making.

Could you afford to go part time when it's paid off giving you more time for yourself before you retire ?

Could you not have downsized, paid off the mortgage and still have some money left from the equity built up?

Other than paying off mortgage early, downsizing can allow you to pay off and deal with financial issues. That of course won’t work for all but it is an option vs overpaying. So paying a mortgage post retirement is not necessarily a must.

I would reduce future outgoings by insulation, solar + batteries etc. first. Then pay off the mortgage.

OK you'll have a large estate - but you can downsize, gift to child on the assumption you'll last 7 years+/spend on holidays etc to lower the tax burden on child and give you £££ to enjoy in retirement (Top tip : don't buy a property abroad, you've the potential of leaving inheritance hell for your child)

Ok I'm assuming you will have property plus £ in your estate when you die.
If the property has mortgage debt still outstanding then presumably the £ from your estate will pay of the outstanding debt.
You are still left with a property over the IHT threshold.
If however you have zero savings AND anticipate not paying the mortgage off before your death, well that's a different matter.
Tbh I would feel very anxious about this moving into my lateryears and consider downsizing as it seems your mortgage isn't affordable if you have no savings .

I do wonder if this is more pressing if people have large mortgages that take up a bigger proportion of income. The monthly cost of my car is about the same as my mortgage. £700 a month give or take. Combo of car loan, tax, insurance and £400 of petrol. Food and bills cost more these days but used to be about the same. The depressing trinity of living costs. Whilst it’d be lovely not to have to pay the mortgage it’s not a life changing amount of money.

I’m don’t understand your point about me having no savings. Did I ever say that or even hinted at that?

A bit irrelevant to the thread but lots and lots saying they overpay on the mortgage, when did you start doing that? I am 38 with a quite hefty mortgage (4 bed detached south east) but my youngest is 2 and doesnt get free hours until Jan '24.

I always feel so behind reading these threads, and would love to overpay but literally cannot afford it at the moment. Just wondering if most start once the kids are a bit older?

Myself and DH are in our very early 50's and mortgage will be finished by the time we are 55 (not the same as paying early I know).
What it will do when we are mortgage free is give us an extra £450pm which will make a huge difference and allow us to do a lot more x

What made a big difference in our finances was DD starting full time school and not having to pay so much childcare x