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Original poster

If you could pay off your mortgage with your savings - would you?

49 replies

PanicPants · 10/02/2008 18:08

It would mean you would be left with hardly any savings at all, so in an emergancy you would be bu**ered.

Does it make good financial sense to do this or not?

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ChirpyGirl · 10/02/2008 20:07

sorry, took ages to write my post and I didn't spot yours!
In your situation I would pay it off. IN an emergency as someone said you can get an unsecured loan but at least your house will be yours free and easy.
Do you have no childcare or very little? If you coudl I wokr work part time, maybe weekends if DH can look after DS, just to make sure there is something in your savings if you are worried, but we haven't had any until now and it hasn't really bothered me.

speak2deb · 10/02/2008 20:11

I get soooo jealous when people talk about paying off their mortgage.

Mine is HUUUUUGE!

Crunchie · 10/02/2008 20:17

I do as lady muck does, BUT I supplement it by taking out 0% credict cards and transfering the amount to an offset account. This offsets my mortgage and when I have to pay it back I do.

I have £25K offsetting my mortgage atm.

So my mortagage was approx £85k , My overpaying (and offsetting) I am down to £75k capital. So instead of the interest being £500 or whatever it is £250 a month. I continue ot pay £600 a month and it all gets paid off quicker. I am aiming to pay it al off in about 10 - 12 years.

I could sell shares and pay it off quicker, but I don't really see the point of that as overall they are my emergency fund

Earlybird · 10/02/2008 20:20

speak2deb - if you have such a huuuuge mortgage, maybe we should all be jealous of you.....because it perhaps means that you have a larger/nicer house than the rest of us?

Original poster
PanicPants · 10/02/2008 20:30

Speak2Deb- don't be jealous, we have a small house and a small mortgage! Nothing grand at all. We also have damp, wonky walss etc etc

And if I stop work - no money either!

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Original poster
PanicPants · 10/02/2008 20:31

walls

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Saggarmakersbottomknocker · 11/02/2008 09:10

I do 0% credit cards too. You do have to be pretty organised though and strict with yourself to put aside what you've spent.

ecoworrier · 11/02/2008 10:05

I think I would pay it off, you've said you wouldn't be left with zero savings, but a few thousand. But I wouldn't give up work straight away, I would work for a few months more just to boost those savings so you had a few months' contingency fund.

I'm assuming you could live reasonably comfortably from one salary, and that it wouldn't be too hand-to-mouth?

WideWebWitch · 11/02/2008 10:06

Yes I would. And then I'd build up savings again if pos.

JingleyJen · 11/02/2008 10:08

we don't have an offset mortgage but we pay off chunks at a time.
Is there a way that you could pay off most of it but leave £10,000 savings (or whatever amount) your mortgage each month would be minimal but you would have S&*t hits the fan money.

Just a thought - good luck!

WideWebWitch · 11/02/2008 10:09

If you have no mortgage and childcare costs then your costs will be so much lower I'd have thought that it will be worthwhile. Could you stop eg in the summer hols?

Oblomov · 11/02/2008 10:20

Surely paying off your mortgage is better ?

Original poster
PanicPants · 13/02/2008 19:35

Have made an appointment with a mortgage advisor to see if a) it makes sense to pay it off, or b) to pay off the majority and just leave enough saving s (in case shit hits fan ) but just pay a nominal monthly amount.

We would be pretty much be living hand to mouth. Mainly because dp pays £500 per month to CSA.

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selby · 18/02/2008 16:36

We offset 60% of our mortgage and we've chosen not to pay off the remainder purely on the basis that we anticipated moving house within the next 5 yrs with the high probability of upsizing rather than downsizing. If you intend to stay put in the house that you live in now, then pay it off but if you see yourself moving in the near future, it would be more flexible not to IMO.

uprightsoapy · 18/02/2008 16:41

Our mortgage is almost completely offset by our savings, which works out at a very high rate of return on the savings (as higher rate tax payers) but gives us the flexibility of using the money for something else should we wish to.

We have continued with the normal monthly mortgage payments, which means it should be paid off in a few years anyway (as we are only paying off capital as the interest is negligable).

Unless you are worried that you would fritter away the money, offset might suit you.

CarGirl · 18/02/2008 16:45

what kind of CSA agreement does your dh have because if it's the old style (ie calculated on affordability and not the straight forwad 25/30/25%) and his payments make allowances for his mortgages payments then paying off your mortgage may put his CSA payments up! Hope that makes sense, are your earnings taken into account for how much CSA he has to pay?

OnACaffieneHigh · 18/02/2008 16:47

If you completely pay off your mortgage, and have no savings left you do always have the possibility of getting a loan against your house if you do need a lump sum for some emergency.

Squiffy · 18/02/2008 16:53

some mortgage advisors work on a commission basis so you may not get the most impartial advice.

Switching to an offset mortgage would almost definately involve paying fees - even if you stay with your own lender. So you will be paying maybe 500-1000 for a benefit that you might not need. Might still be worth it - depending on the mortgage size involved.

Staying as you are leaves you paying X in mortgage fees and only receiving Y on the other side in interest (Y will be quite a bit smaller than X). If you check the interest rate in % terms that you are paying on the mortgage, deduct from this the interest rate in % terms that your savings acocunt attracts and then multiply the difference by the outstanding mortgage amount, then the number you get to is the annual cost of having the peace of mind of an emergency fund. It might be a much higher number than you expect. that is the amount you are giving away every year by NOT paying off your mortgage.

If you pay off your mortgage you will have no savings but you will have a house with no mortgage. That way, if you need funds for an emergency you should be able to take out a short term loan against the house whenever you needed. BUT this will normally be at a higher rate than a mortgage, and if you don't have a good credit rating then it might be difficult to get a loan approved.

At the end of the day the answer depends solely on your level of exposure and the likelihood of needing a slush fund, and the cost of switching to an offset. Personally I would not even think about this - I would pay off the mortgage in a heartbeat because is makes financial sense if you are unlikely to need money quickly. But I would then carry on working for another few months to build up remaining savings to 3 X monthly outgoings (excluding mortgage) at least, and preferably 6 X monthly outgoings, to cover you for a rainy day.

slug · 19/02/2008 11:48

We were in your position and just did it. We were left with about £5000 in savings and DH promptly left his job. Financially, things are a little tough but we never have to worry about interest rate rises.

However, emotionally it was the best thing we have ever done. DH is happier, the sluglet is secure with a full time Daddy and I was able to change job and take a pay cut without any major panic. eventually DH will go back to work and we'll work on building up our savings again. We've never regretted it.

dinny · 19/02/2008 11:51

of course! definitely! mortgage-free living is exceedingly desirable.

Original poster
PanicPants · 20/02/2008 15:11

Cargirl - hadn't thought of that !

Think paying off all/most/half of the mortgage is the way to go. And I hadn't thought about being able to borrow against the house if we absolutely had to.

Thanks everyone for your advice

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LaChapponieDeb · 23/02/2008 21:14

I did this once. Then a few years later I wanted to move and needed a mortgage and it was a complete nightmare! I had chucked out all my mortgage statements and I no longer had any history of being a good mortgage payer because the bank destroyed my file after 3 yrs. I said 'how do you think I have a mortgage free house in the first place?' and they replied 'you might have had an inheritance or won the lottery!'

Now I would always keep a small mortgage, just in case I ever want/need one again in the future.

cat64 · 23/02/2008 21:48

This reply has been deleted

Message withdrawn

Original poster
PanicPants · 26/02/2008 19:13

Thankd Deb and cat, we've decided to pay off half the mortgage - (once we are out of the redemption period) so reducing out monthly outgoing by about half, but still keeping a small (ish) mortgage to keep credit rating up, and some savings.

A compromise then on everything!

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