To not pay off my mortgage?

[TwoTimesShoeShop]

In a few months time, I'll be in a position where I have enough savings to pay off my mortgage.

However, the interest rate on my mortgage isn't too bad (3.5%) and I could earn a little more in interest by leaving the money in ISAs. There's no early repayment charge.

But is there a big psychological gain in having no mortgage, versus just having a mortgage and the equivalent in savings?

Head tells me to leave the mortgage alone. AIBU and will I feel better to pay it off?

I know I'm lucky to have this dilemma and appreciate not everyone is in the same circumstance etc.

I’ve and the same quandary but my mortgage is fixed at 1.89 til it finishes in two years and getting over 5% in savings so better financially that way was much as I’d love to be mortgage free !

I'd put it in savings and let it accrue interest. I assume you're on a fixed rate, if so I'd let that end and then repay the mortgage in full if its not cheaper to borrow again.

Although, and this is something for you to discuss with a financial adviser, it might be best to put some of that money in your pension.

Sometimes you have to do things that don't seem natural to make your money work for you.

Keep the mortgage, make more in interest..

Is that all of your savings? I wouldn't pay it off given the interest rate is higher if so. You don't want to be stressing that the boiler breaks/car needs to be replaced etc. Having liquid savings earning more than the mortgage rate is a good position to be in, and if that changes you can pay it off then.

Yes, that would wipe me out and then I'd be building savings up again.

So maybe I shouldn't even consider it until I have enough to pay it off plus a buffer of savings.

Oh that's a good rate! Definitely makes sense to leave it. It would be nice to be free though.

Could you put a chunk of money to reduce mortgage but keep bulk in savings?

I’d do a bit of both. Split your savings in half, keep half, pay a chunk of the mortgage with the other half. This way, the mortgage becomes a negligible amount, you still have savings.

I’d leave it if you have a secure job and/or income protection insurance.

Far better ways of putting a big chunk of money to use than paying off your mortgage. Unless your mortgage feels like a proper millstone.

www.barclays.co.uk/mortgages/offset-mortgage/

You could investigate offset mortgages?

We had a lot of savings and then spent them on an extension. We still have a buffer but a much smaller one than we did before and it does concern me.

if you lost your job, you wouldn't be able to release equity via a mortgage as you wouldn't have proof of income to meet the repayments. I'd stay as you are for now, maybe pay down a chunk if it will make you feel better.

How long would it take you to rebuild your buffer. We have been mortgage free for a few years and are currently saving £4K a month across various savings/isa/shares

I chose to repay. It was such a psychological milestone and while I might have been able to utilise saving interest to my advantage (especially given the decent rates in the last 18mths) I decided it wasn’t worth it for me. I just wanted to be rid of the mortgage! Plus my fixed term would have ended, or would be coming up about now at a much higher rate than I had.

We are retired and our house is paid for, and it is a very nice, secure feeling.

But in this case it makes no sense to do that as the mortgage rate is lower. Its literally throwing money away to pay off the mortgage.

If the OP wants to not have a mortgage payment coming out of her budget, she can use her savings to make the monthly payment until the end of the fixed rate. But it sounds like they don't even need to do that as they're building up savings, ie have spare money each month.

I would want to make sure I had enough savings kept back to pay the bills for at least 6 months if I lost my job and also have a pot set aside for an emergency fund to cover anything like a big car repair bill / boiler replacement / roof issue etc

The thing is what if you had an accident or an unexpected medical condition(God forbid) or interest rates rocket suddenly. All the experts say, get rid of debt asap.
Also once you have got shot of the mortgage you can regularly invest in stocks and shares isas which means you don't fall foul of the possibility you buy at a time when isas are expensive...it spreads the risk.

To give an example, we cleared our mortgage in our mid 20s, we have never earnt more than 50k a year between us, but now have investments of over £1m, a house, combined pension pots of £900k and I retired at 55. My wife still works because she enjoys it. If we had to have paid a mortgage for 24 more years, we would never be in this position.

Before anyone has pop, I would have gladly paid 48 years mortgage payments just to have 5 more minutes with my parents

The thing is what if you had an accident or an unexpected medical condition(God forbid) or interest rates rocket suddenly. All the experts say, get rid of debt asap.
Also once you have got shot of the mortgage you can regularly invest in stocks and shares isas which means you don't fall foul of the possibility you buy at a time when isas are expensive...it spreads the risk.

But if she has an accident etc then she'd be far better off with a (for example) £100k mortgage and £100k in the bank, than no mortgage and nothing in the bank.
You can regularly invest in stocks and shares ISAs regardless of whether you have a mortgage. It might be more risky than paying off the mortgage but in the long run you are likely to be much better off investing over the years than rushing to pay a debt that is being eroded by inflation. Even better to invest in a pension and to have the tax advantages too.

There are sensible reasons to pay down a mortgage but also very good reasons not to do so.

Your mortgage must be pretty low though. And you still have all your bills to pay each month. So I'm not sure what difference it really makes?

I'd just leave it as it is. Freedom of no (very small) mortgage Vs freedom of having savings if you lose your job/COL effects.

I chose to pay the mortgage off and have zero regrets. Even at a low interest it was like having a stone around my neck. I am now 100% more secure and comfortable with the idea of losing my job suddenly because I know that I may have to starve and go without heating for a few months but I will never be homeless.

Keep the buffer and, if you're happy with the level, just overpay your mortgage with some of the money you would have been adding to your savings from now on. That way, your balance will be lower when you get to the end of your current fix and will be less of a shock if you can't secure a rate as low.

All the experts say, get rid of debt asap.

Financial adviser here, no they don't. They say 'get income protection and life insurance so it doesn't stunt your ability to pay your bills and into a pension if you're too ill to never work again'.

Life has changed significantly for people over the 25 years I've been advising and products have developed which has changed the advisers stance on this. Having mortgage debt, and savings is not necessarily bad. It is how to utilise both that matters, and for that most people need proper financial advice for their individual circumstances.

@TwoTimesShoeShop one thing you have not mentioned is whether you have an early repayment charge on your mortgage currently.