AIBU to be nervous about paying the mortgage off!

[Blondiebeachbabe]

My 5 year fixed mortgage deal ends in November. The current interest rate is 1.54% The new rate will be 5.02% I’ve been saving like mad to get together enough to just pay it off in November. The balance will be £22k. I can do it but somehow I feel so nervous sending that money over and not having it to hand anymore. WWYD? I will have a bit more left in my isa for emergencies. I think it’s just that I’ve never spent that amount of money in one go before.

i think mortgage is good debt personally and boosts your credit rating.

To each their own though, well done Op.

I know what your mean - I like to maintain liquidity for those just in case moments.

You could get a 0% credit card and put your groceries on it for a few months to help you build your savings pot and maintain your liquid funds. If it’s just groceries, you wouldn’t spend more than normal.

I would pay it off and then save the mortgage payments to build back up my pot for the next couple of years

I paid mine off, then paid off a funeral for both of us then unfortunately became very ill with a very bad break down. I had to leave work but having paid of the mortgage made such a difference. It took the worry of being homeless away which was a huge relief.

Im not so sure that it’s only mortgage rate against interest rate. I would also consider if you might need money for something in the next 24 months, borrowing is always more expensive. Also the allowed ISA amount is going to be less so if you will take money out of ISA now to repay your mortgage it might be not in your interest in the long run. There is always possibility to pay some of mortgage off and keep low enough monthly payments but still keeping some savings.
is it certainly 5.01% ?

Everyone wants to pay off the mortgage and to feel fully free of it - I know, I know! - but It can be a good idea to keep a mortgage open in case you should need to borrow money, because it's a cheaper rate than other forms of borrowing and usually quite simple to increase the loan with your present lender. So you could pay off most of it but keep a few thousand in it still while you can build up your savings at the same time.

An alternative is that you pay off the mortgage completely and then save the amount you would be paying monthly if you kept the mortgage. How quickly your savings build up will of course depend on how big your monthly mortgage payments are. And in the meantime you rely on your emergency funds to cover unforeseen events.

One thing to rebuild a good nest egg quickly is to keep saving like you currently are, and add the mortgage payment amount to that, for an extra 6 months. You’ll be amazed how quickly that will rebuild a good buffer for you. And at the end of the 6 months, re-evaluate and think about how much you want to regularly put away and how much you want to put into everyday spending or more “treat” type short term savings (so not just having an emergency fund, you also get a holiday or theatre trips or replace the car….or whatever, fund). And how much you want to just put into your everyday spending budget.

But take the first few months to rebuild a buffer before making major changes. At least in terms of the monthly mortgage payment amount.

I became mortgage free aged 40. I got a deal to overpay. Each year I probably about 8 months of payments.

Turned 40 in lockdown. Couldn’t do much. Mortgage balance was £4.8k. Parents paid that off for my birthday.

This helped a lot during the 13 months of unemployment.