Pay off remaining mortgage now or keep savings as a buffer?

[fortunatelynot]

I know this as probably been asked many times before and every situation is different but I am considering paying my mortgage off and would be interested in the experiences of others.

I am mid forties and £60k left on my mortgage when my current (amazing) deal expires in the summer - I was lucky enough to get a 5 year fixed deal at 1%. Things have obviously changed now which is leading me to consider this.

I am a single parent (although my children are now young adults - they have been to university and one in particular has required quite a bit of financial support - but her course is nearly complete). I was divorced 15 years ago and literally started from scratch financially. However due to my salary and buying a very modest property 12 years old, I have the mortgage balance as mentioned.

I have approx. 95K that I can access. This is a mixture of premium bonds, some money in my normal account and an ISA. Paying off the £59K would obviously leave a big dent in this. I am aware of the 'rule' that if your savings are earning more and your mortgage rate is less, then it is better to not pay down your mortgage. However if I remortgage in the summer, I believe my rate will be around 5%.

My job, although well paid, is incredibly stressful and I have considered changing jobs at some point which would likely mean a lower income. I have also not ruled out moving at some point which would involve a slightly bigger mortgage but do not feel that this is the right time. The pros and cons I can think of:

• if I pay off now, and then do move in years to come, taking on a mortgage will be hard hitting!
• Is it best to keep some level of mortgage in case I needed to borrow/remortgage to move in the future?
• If I paid if off, would my buffer be ok?

With regards to my pension, I pay into one and this is a DB pension .

Any mumsnet financial wisdom out there?

Thank you!

Did you have particular plans for the savings or were they intended as rainy day money?

If it was me, I would pay it off and enjoy the certainty that the house is mine. The world is feeling very uncertain and I don’t see interest rates sorting themself out anytime soon. If you’re worried about your savings, then put aside the equivalent of what you were paying for the mortgage into your savings whilst you are in your current and it will quickly build up again. You can reevaluate this if you do change job for a lower salary.

You’d have 35K left over which, with no mortgage, is a decent buffer. Put what your mortgage payments would have been into savings and it will soon add up.

I would pay it off and start saving /investing if you’re not old, the same amount each month. If you urgently need money before your savings have built up again you could remortgage again.

I’d pay it off, then put the monthly mortgage payments into savings to build it back up again. You’d be left with £35k (potentially more since you say you have £95k that you can access - do you have more that you can’t access this summer?) which is already good, and you’d have no mortgage so would be able to build it up more quickly.

I would over pay (not pay off) and invest some of it in a S&S ISA. That 95k (or say half of it) could be earning you a whole lot more. You’ll have ups and down but over the longer term it’s better than cash ISAs which can rarely keep up with inflation .

I would pay it off and as previous posters have advocated, invest what you would have paid each month into savings and investments. It might, on paper at least, be better another way but when we paid our mortgage off the feeling of freedom/security was amazing. As someone who grew up in a family who were cash poor - security is very important to me.

Thank you for your responses.

I could consider making an overpayment and putting another £2K in a S and S ISA. However it is comforting to have it paid off!

Once it's done it's done, if you delay paying off you will always find another excuse not to do it. There is an argument that if you can earn more than you are paying in interest you should keep the mortgage going, but my feeling is it's better not to have the debt, pay it off and save the money that you were using to make the repayments.

Why don’t you look at an offset mortgage? That way you keep your savings if needed but solve the interest rate issue, and you can just pay down capital. Best of both.

This

also if the kids are older I’m guessing you want be wanting to buy a bigger house, potentially downsizing if anything.

if I could pay our mortgage off I absolutely would x

not based on science but I think psychologically it’s easier to leave the 95k untouched and just continue to pay off the mortgage at your current rate, than to pay off the mortgage and attempt to resave the money. It’s so much harder to say no to treats if it’s ‘just’ not going to be saved than it is to say no because you have a mortgage to pay.
If you put the savings where they work hardest you could have both your mortgage paid off and a tax free nest egg worth £200k (even if you add nothing more) by the time you are 60.

I’d pay it off

I would pay it off. I did and though I probably should have kept it and put more in pension, the relief of getting it gone was and remains worth it. I now put my mortgage payment into my pension.

It has given me the mental freedom that I can change jobs or retire. Even though I won't for a while. I think the relief you feel, is particularly high when you are financially single.

Same position with mortgage, although I am married. Plan to pay off when deal ends. Savings will accrue quickly with no mortgage. (As long as i remain sensible 😅)

I wouldn’t pay it off! I feel like it’s way more reassuring to have money you can access for whatever you need than to have a paid off house (given you could always use the money to pay it off later on)

How much would you expect to be saving per year once the mortgage has been paid off? If it goes above your annual ISA allowance then you’ll need to think what to do with it to mitigate any tax on interest - less of an issue if you’re still paying down the mortgage.

That is, look into what the various mortgage, savings and tax rates might be, and see what works best for your financial position. Could well be cheaper and easier to keep hold of the mortgage.

Pay it off. The psychological impact of not having it anymore is vast. No one can come take it off you as its fully yours. We paid off ours in March, it's still sinking in but we feel so much more free and lighter. You will about the same in savings as we did after but we didn't even second guess it. We wanted it gone at the end of our deal as rates were much higher.

You are currently paying £48.50 a month in interest. If you switch to a 5% rate, you'll be paying £242.46. Granted, if you kept your £95k in a savings account that pays 5%, then they cancel each other out. But most ISA's only pay 4%.

I'm in a similar position. My current deal at 1.54% ends in November. The balance will be £22k. I have £35k in savings, so if I repay it I'm left with £13k. But I'll be able to build that higher once I'm not making mortgage payments.

Have you fed all the info into Gemini? It gives you lots to think about.

If you remortgage for 10 years on £60000 the repayments will be around £552 which will total £66000 approximately

put away £552 for 10 years at 5% interest - which is just about possible to find and you’ll have £82000 in 10 years

so my question is do you have £28000 to give away?

If I was in your shoes

id pay off the mortgage
then I’d spend £500 a month on extra pension for 5 years. As I’d get tax relief if it’s a company pension scheme so it wouldn’t actually cost me £500

after the 5 years are up I’d reevaluate my situation.

If you invest the £95k wisely it should be double that in 10 years time.

Did you type this post 10 years ago? Where can you get a 10 year mortgage with a rate of 2%?

I paid off the mortgage so if I wanted to I could find a less stressful job or more likely due to my age getting kicked to the kerb and not having to find a job in the same price range.

We will be in a similar situation next year. Definitely planning to pay off the mortgage and then start pumping that into pension and stocks and share isa. As lots of people on here have said it will give you so much freedom and you’ll still be left with a decent savings pot that can grow quickly.

We have an offset mortgage will th Coventry building society.

We don't pay interest on the amount we have in the offset savings but can still access the cash is we need it.