Paying off the mortgage

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Is it your goal to be mortgage free? If yes, why? If not, why not?

I always thought that was the point...get a mortgage, pay it off as quickly as you're able, be mortgage free. Boom. But quite a few times recently people have said 'Why are you so keen to pay off your mortgage?' or 'Don't be in such a rush* to pay it off'.

Is paying it off not the point?

*wouldn't say I'm in a rush fyi, we currently have a 25 year term and are looking at options for overpaying to bring that down to 15 years. So that we'll have more disposable income in our 50's rather than 60+, and so that we'll have options to decrease payments/extend the term when/if DC go to uni and we need more funds.

The arguement for not paying it off would be that you could potentially invest the money in something else which would yield a higher rate of return than your interest rate is costing you. More of a challenge now rates have gone up! But that’s the general principle.

We made big overpayments on our last mortgage which helped us move from a small 3 bed semi to a big 4 bed detached for the same monthly repayment amount thanks to equity brought forward from the old house and only needing to lend 38% LTV. It was absolutely worth it for us then.

I paid mine off last year, 17 years early. I was spurred on by an online calculator that I found. Put in existing term and current outstanding balance and typed in £50 extra per month. The term started dropping and the amount of interest saved was appealing.

Then I played around with different numbers on the overpayment until the term started dropping by months at a time. It became very compelling to pay it off early. Combined with the fact the mortgage was big and I was the only person paying it, post divorce.

I did my budget and worked out how much I could manage in extra overpayments. 6 years later, I paid my final payment. I was proper tearful on the phone to the bank when I rang up and said "I'd like to pay off my mortgage please".

Even if you can only overpay by £50 a month it will make the end of it come sooner.

And many spending habits changed in this time and that was personal choice. I have really modest tastes in life thankfully so didn't find that too hard. Every spare £10 went on the mortgage. It all adds up

We didn't overstretch ourselves with our mortgage and managed to pay it off 7 years early as we could afford to over pay.
We paid it all off the year we turned 40.
Really glad we did, we have friends in much bigger houses but they will be paying the mortgage well into their 50's.
Being mortgage free has also allowed me to become self employed, a risk I wouldn't have taken before it was paid off.

I’ve been overpaying but also invested in stocks and shares ISAs which will enable me to liquidate and pay off my mortgage next year when my fixed rate is up.

I’ll use the extra £2000 a month (mortgage payment) to invest and may have a nice holiday next year.

paying off the mortgage isn’t everyone’s dreams, people are more willing to take risks but for me this gives me psychological safety.

We’ve paid chunks of overpayments off to the point now where the monthly payments are under £300 a month and the LTV is around 15%. I now sort of feel like it’s not worth doing any more overpayments, as the bill is so low compared to all the many many other bills we pay and there is a value to keeping some fairly easy access savings. In an emergency you can’t unpay your mortgage!

I overpay a small amount each month but would rather save tax efficiently in my pension than pay off a larger amount of the mortgage from taxed income.

We paid off a 35 year mortgage in 12 years, when we were over paying the interest rates on savings were less than we were paying in interest. Did a combination of monthly overpayments, shortening the term when we remortgaged and then paying a large chunk at the end. Now that the interest rates are high, we are making quite a bit on our savings/investments, and are saving about £4K a month, so the pots are going up quickly. Another couple of years and we should be able to afford a much larger detached house with no mortgage. We will both be early 40s so plenty of time to save for retirement, but also enjoy some treats.

so pleased we paid off when we did, several friends are facing their mortgage doubling with the change of interest rates

We are paying 1.9% interest in our mortgage.

And getting 5.2% on our savings, so it makes so sense to over pay at the moment.
(we have enough in savings to be mortgage free so when our fixed rate is up we might pay it all off, or we might have a small 5 or 10 year mortgage to give us more £ to play with.... will see what interest rates are doing in 2 years time)

Despite having a really good rate, I paid over £13k in interest last year. I’d like to avoid paying so much interest.

I’m on a fixed term and lucky enough to have savings to clear the mortgage once the fixed term is up.

Get it paid….mine was done at 48….I’m 59 now….nhs retired and returned 2 days a weeks…..lots of lovely holidays….treats for GDs and AC and still able to save

It makes more sense for us to pay into our pensions. The 25% tax free lump sum we can take will clear the mortgage. So - tax free going in, tax free growth and then tax free paying off mortgage. By my reckoning, to pay off (say) £100k from taxed income, I’d need to earn approx £160k. To pay off £100k out of tax free income and investment growth over ten years - I’d need to earn approximately £70k.

it also helps that we have a ten year interest only fix of 1.6%.

I'm not very financially sophisticated and mortgage is our only debt. We have been overpaying for last 5 years (1.99% interest rate) which meant when we needed to remortgage at end of fix, our outstanding balance was much lower than it would have been and our payments have changed by a few £ despite interest rate more than doubling. We'll continue to overpay to be mortgage free for the uni years and/or so we can stop reduce hours at work in mid/late 50s rather than late 60s...

It has pros & cons. We've just paid ours off, late 40's. It's wonderful to be repayment free & not care about interest rates. We paid a huge chunk off by selling investments because interest rates were rising & it became the better option.

But, on reflection, I do wonder if we focussed too hard on paying the house off. We sacrificed a lot of fun to do it. We did indulge in some incredible travel before kids, but that's about it, whereas my DB & SIL, who still have a hefty mortgage have lived abroad, taken a year off with their DC to travel etc.

Having said that, we can now afford a private high school for the DC instead of the horrific public option & are saving to travel again instead of that money going in interest. So I'm still not complaining!

It’s depends

for example if you have surplus money at the end of the month should you pay it off your mortgage to shorten the term?

or would the question be

if you have surplus money at the end of the month should you pay it into a work pension, therefore saving £30 for every £100 you pay in or pay the money off your mortgage. Or should you split the amount

the more you pay into your pension earlier on the more it’s worth - so it’s not sensible to pay the mortgage first then look at topping up your pension

so doing both with a 70/40 split maybe the better financial option to make your money work best for you

Should be 60/40 that was a typo sorry

On reflection I would have been better off had I put more into a pension to get the tax relief on the way in which is way more than interest rates have been. However hoping to be mortgage free next year and saving hard now to get to that. I think I will just be slightly short, but it will be a relief not to have that to pay. I will then throw everything at the pension.

Now I would tell my younger self to put more into the pension than overpay the mortgage. I would still do a little of that too. Job security gets less as you get into your 50s (at least in my case) and finding an alternative gets harder too, so not having a mortgage will be such a relief.

My mindset on this has changed. I used to want to get rid as quickly as possible but now I’d rather put any additional money into pensions. I’ve been convinced about inflation reducing the debt. However, my threshold for this really depends on interest rate. I’m only on 2% - I’d feel a bit less bullish at 4-5%.

I get the tax relief point on pensions but of course you can't take them until 55 (shortly to raise to 57 I think) whereas potentially people could be mortgage free in their 40s and have the 10-17 years of not paying the monthly payment.

We'll be mortgage free in 3 years when I'm late 40s and I can't wait for the freedom that will give us.

Yes for the security really. It’s important to me that we will have a roof over our heads no matter what.

After watching my dad rent in older ages and now that huge cost it is now it’s just important to have a house no matter what life throws at us.

Also bought later but manageable mortgage to over pay so like others it frees up money pre pension years.

We've paid ours off and it's incredible how liberating it is to have 1k extra a month to spend on what we like.

I had this. Everyone telling me to chill and I ignored them and paid it off in 11 years. Then the next month the interest rates shot up. I have never been so glad in my life!

This.👍

My first mortgage was paid off in my early 40's and although I was already well into my company pension scheme, I started AVC's. With the mortgage cleared I upped my AVC's and put more into savings.
Long term planning was always my aim.

The quicker you pay it back the less interest you pay. I took full advantage of about 8 years of very low interest rates to pay an extra £500 per month. I paid it off July 2023. I'm saving every month now as the interest went up to 5 percent whereas I repaid on 1.35 percent.