Should we pay off mortgage early?

[Reachforthestars00]

We are a married couple in our early 50s. Almost paid off mortgage on our home. Only 2 years left, overpaying, and could pay off earlier. We plan to move house (upgrade) in next few years - and will need to raise a new mortgage to fund the move. Does keeping our current small mortgage make us more likely to get a new larger mortgage? Is there any benefit to paying it off early? Might we be penalised if we don't have credit when we apply for a new mortgage? We are getting a bit worried about our age. We have about 15 years to retirement. Jobs are fairly secure (as much as these things can be). Pensions all in order, but not massive personal savings. Thanks.

I would divert capital to ISAs and keep the mortgage

Where’s your highest interest rate?

I am paying 4% on my mortgage but earning more than that on my ISA/savings.

so no point paying the mortgage off when overall I’m better off with the money in savings.

if you’re in your 50’s why the upgrade? Most would be downsizing. If you’re getting a bigger mortgage you need to factor in a short term, unless you can show your pension can support the mortgage.

Have a look at the Sprive app. It’s just been on Dragon’s Den. My husband said it’s for over paying mortgages. Not sure if it’s right for your situation but worth a look.

Put the max into ISAs each year and if any left then use to pay down the mortgage

A couple of risk adverse points:

If you have redundancy insurance, check whether you need to have a mortgage for it to pay out.

Also if you have more than £16k in savings you are not eligible for universal credit. Savings over £6k reduce the amount. So it might be better to clear mortgage debt to get below that amount of savings if your circumstances might change (poor health or redundancy).
I'm not aware of any benefits that pay a mortgage so this strategy might save needing to do equity release or a forced house sale.

We have outgrown our home. Upgrading to a nicer area, more space, guest room etc. Also, teenaged children who won't be flying the nest in the foreseeable future.

Interesting to see how many say to save rather than pay off mortgage. Interest rates are pretty similar. We have spent so long dreaming of owning our home, it's hard to imagine delaying ownership.

My husband's concern is if we have no mortgage (because we pay it off), will we get a new mortgage when we need it?

I don’t really see the point if you are planning to upgrade as you won’t be mortgage free for long. We have been overpaying but are now looking to move so are putting the extra into an ISA to support the move instead.

if you’re in your 50’s why the upgrade? Most would be downsizing.

Downsizing seems to be very much a MN thing while I don't know a single person who has done it IRL.
We moved to a larger NB house in our late 50's and as it turns out, two of our new neighbours are even older than us and did exactly the same.
Amongst all our friends & family and looking back at our parents & Gparents, no-one did it or is planning to do it.

I’d keep it is ISAs for now, if you are planning to move it may come in handy for various bills. If you are planning to move and take out bigger mortgage I don’t think there is much advantage paying off existing mortgage now. That’s assuming you don’t have a stonking interest rate though!

With respect to a new mortgage in later life, my sister moved in her 50's and was offered a range of mortgages (from a broker) which went up to 70 but more importantly, permitted the whole sum to be paid off after just 2yrs without penalty.
Still plenty of options out there.

50s isn’t so old!

I know plenty in their 50s with multiple children living at home - and they may there until they’re 30 themselves given the state of the housing market.

The only people I’ve seen downsize are in their 80s+ where they can really no longer cope.

Thanks for this reply. It's the ability to remortgage in our 50s that is the concern. That said, I very much plan to be retired at 65! Hoping pensions will pay out a lump sum that would clear any remaining mortgage.

The consensus seems to be to save, which is a perspective that had not occurred to me, so thank you.

Stocks and shares ISA if your mortgage rate is under 4%. You’ll earn more with compound interest than paying it off early.

I always think it’s best not to look at these things in isolation…look at your full financial plan. Do you have any consumer debt…bin that first. Do you have an emergency fund (3-6 months of your basic outgoings). What’s your retirement pot’s looking like…does mortgage rate exceed your savings rate?

Totally boring and adulty…but don’t focus on them in isolation.

I only recently sat down and worked out the numbers comparing putting the profit from my rental property into overpaying the mortgage on it compared to putting the profit into a S&S ISA. Due to compound interest and based on an average return rate, I worked out the mortgage would be cleared 10 years earlier if I invested the profits in a S&S ISA and then used this lump sum to pay off the mortgage. I was pretty shocked, but glad I realised this now!

We are in our 50s and had no mortgage for years. Then in November we took out a mortgage on our home to buy a house abroad outright. We used Lloyds.