Would you pay off mortgage now?

[Pearlyqueen21]

We remortgage in 4 months, so I’m getting my head round the current situation with interest rates, poor returns on investments, the need to make our monthly income stretch further and further, etc etc.
I need to look at how easily we can access the cash (currently invested) but I think we can pay it off (or near enough) by plunging our savings into it. I would hang onto an emergency fund of £10k. We could put the mortgage money into energy costs and saving a bit each month. Sensible?

I would pay it off purely for the security of having done so. I appreciate that you would do better investment wise to plough it into pensions though.

I have 27 months to go before I have to remortgage and I am gong to try to save enough to clear it rather than have to remortgage.

I think it's sensible yes. You then know you have a house and roof over your head, without paying the repayment fees if you take on a new mortgage and want to pay it off part way through the term. The interest rates on mortgages would probably be cancelled out by the interest on your investements, eg they would be fairly equal, and you could always remortgage in the future if you found yourself needing cash at that point.

Does 10 k cover 3 months expenses? 6? Broken boiler?
Depends how much it is , how much your salary is etc

Absolutely. It is our plan too, next spring. The mortgage payments you save each month will hopefully build your savings back up quickly. £10k is enough to pay for a new boiler or replace a small car if necessary so for me that would be adequate savings. Our mortgage is 1.84% fixed and I'm so looking forward to getting rid of it and not having to sign up to another.

We are in a similar position. We either pay off or remortgage next month.

At the moment we are trying to work out whether we can invest somewhere that will have a better rate of interest than any mortgage we find. Currently inflation is eroding the value of the debt. If you can afford it and you can get the money to work harder else where, it's not such a bad thing to have debt.

I think this is my view too - the unpredictability of putting it into a pension just isn’t as attractive as it was a year ago. Thanks for your reply.

I think it's hard to tell if it makes sense with the info provided. Are your investments in stocks and shares or in a low interest bank account? If they're in the former then I would check if it's worth selling now. I think the stock market is not doing great at the moment so probably selling now you'd make a loss. On the other hand if you have the money in a instant access account with a poor interest rate, then you might do better clearing your mortgage.

That’s a good point, I will do the maths on that. I’m local government, not highly paid but secure. Husband is self employed so less stable.

Stocks & shares. I’m tempted to cut my losses, but I also can’t remember how easy access the funds are. I need to speak to them on Monday to get a clear picture of what could be accessed in the timeframe. Thanks for your reply, it’s good to read a different view. I need to consider every ramification.

Do you have dc ?
How old?
Pension for your dh?

I wouldn't be pulling money out of stocks and shares right now unless I had to.

How much of a mortgage are you talking about?

Id be tempted to clear any cash over 6 months spending into the mortgage, then fix for a decent period.

One teenager. DH doesn’t have a pension, which is the fly in the ointment. He has an inheritance ready to put into one, but has been avoiding the issue. My suggestion would be he stumps up a smaller proportion than me, if we decide to pay off, then he puts the reduced lump sump into starting a pension pot, and concentrates on saving into a pension as his priority once our monthly outgoings reduce a bit.

Interesting. I’m sure that’s a more financially astute approach. £75k left on mortgage. We have low monthly payments just now, £370. This will increase to £450+ on remortgaging, while we bear the increased energy bills etc. Financial sense versus the grim reality of increased cost of living is a hard balance. This is why I’m so tempted by the idea of cutting down our outgoings even at a cost to future investments. Oh for a crystal ball!

Have you considered an offset mortgage? First Direct do one. Any savings you have with them are set against the Mo and you don’t pay interest on that bit of the mortgage. So if you took out a £150k mortgage and put £50k into a savings account with them, you would only pay interest on £100k of your mortgage, not £150k. A handy place to keep your emergency fund.

Why not just overpay on your mortgage from now on. This will reduce the overall amount outstanding. Martin Lewis has a calculator on his site that models how overpaying impacts the outstanding amount.

I’m learning a lot here! Thanks, I will look at this with DH.

Many thanks for all your replies, they are all giving me plenty to think about and research. Just what I needed 👍

He won't be able to stick a lump sum into a pension in one go though unless his lump sum is lower than his annual earnings. There are restrictions.

I also wouldn't pull out of stocks and shares now while they are low.

Don't dwell too much on the numbers. We are going into uncertain times and the elephant in the room is for how long interest rates will continue to rise and inflation persist. We have near full employment and too few goods and services to satisfy demand. If you want certainty pay off or reduce your mortgage. It does not have to be all or nothing - a £50k reduction may be enough and you could keep a higher cash buffer.

Keeping the investments might be sensible on paper, but could prove to be a gamble. Look at it the other way. If you had not mortgage today, would you take out a £75k loan secured on your house to invest in shares? There has been a loss of appetite for that sort of loan over the last 12 months.

@Soontobe60 Just to explain I don't want to overpay it because (a) the interest on my mortgage is lower than I can get in a savings account after tax (b) my mortgage isn't flexible so I can't borrow back any overpayment if my circumstances change, but my savings accounts allow me to take the money out whenever I like.

Do not encash investments to pay off your mortgage. You can always do that if things so south, but right now I’d sit tight on investments.

Pay off as much as you can as long as you have a reserve. The interest you pay on the mortgage is a lot more than what you will make in savings and stock markets aren’t doing much at the moment.

And yet the stock markets all over the world will come out of a recession before any economy does.

Use your savings to pay off some, but not all of the mortgage, then remortgage. Don't sell shares at the moment.

If you have suffered a dip in your stocks and shares, selling them now just crystallises those losses. I wouldn't sell when they are low.