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Original poster

To pay off mortgage or not?

54 replies

Coconutstory · 26/10/2021 21:24

I’ve just come into £75k inheritance. My mortgage is £56k
I planned to pay it off in full, but several people have said not to pay it off in full…. But to pay half or some other amount.
I have no other debts. What is the done thing? Pay it off in full or not?

OP posts:

cloudtree · 26/10/2021 21:26

I’d pay it off. No point in keeping debt and savings depreciate due to inflation

Stickyblue1987 · 26/10/2021 21:26

I would pay off the mortgage if you don't have other debts.

CocaColaTruck1 · 26/10/2021 21:26

I'd pay it off!

Dollywilde · 26/10/2021 21:26

I think it’s because mortgage borrowing is generally the best rate you’ll ever get. So it’s worth keeping a tiny mortgage ticking over so that you have the facility for cheap borrowing if you ever need it in the event of a rainy day - especially if you’re using the bulk of savings on the mortgage pay off. All a very personal decision based on your individual circumstance though.

rubyslippers · 26/10/2021 21:27

Pay it off
The freedom it will give you is lovely

Lazypuppy · 26/10/2021 21:27

Careful of early repayment charges. Thats ptobably why some peoplr say keep a little then you can pay off once out of a deal.

But i wouldn't pay it all off i'd do a bit and keep some as cash in the bank

YaFlamingGallah · 26/10/2021 21:27

I'd take financial advice. Depending on how old you are, it might be better financially to pay it into some sort of provision for retirement or investment, to give you more years for it to accumulate.

YaFlamingGallah · 26/10/2021 21:28

This reply has been deleted

Message withdrawn at poster's request.

GoBrookeYourself · 26/10/2021 21:28

It depends on if you are fixed in, on standard variable, if fixed in how long for etc. If fixed in I’d pay off the maximum amount until you can pay it all off with minimum penalties OR change to an offset mortgage and pay 0% but still have the luxury of savings for a rainy day.

Tsuro · 26/10/2021 21:29

Pay it off. I paid mine of this year and it’s liberating to know I have no debts especially as I’m not planning to move.

Neighneigh · 26/10/2021 21:31

If you won't incur penalties I'd pay it off, yes. As for the rest, we've been looking at the most sensible investments recently for a relative and premium bonds come up top, especially if you want direct access to the cash, if you might quick access to it.

Unreasonabubble · 26/10/2021 21:32

Wow! Wow! Wow! Pay it off!!! Just think, you can then relax and know that no matter what happens, you own your house. If the worst happens, you can sell it and liquidate some money. Put what you would normally pay for your mortgage into savings. Win, win.

DurhamDurham · 26/10/2021 21:35

One of our happiest days was paying off our mortgage. It's liberating financially but also symbolically, the sheer relief we felt knowing we owned our home outright was such a good feeling. Still is and no regrets.

Kite22 · 26/10/2021 21:58

I think it depends on how old you are / what stage of life you are at.

Financially I can see that it might not always be the best thing to do, but there is SUCH a good feeling about knowing you own your own home, that it is quite difficult to quantify.

OTOH, you are presumably never going to have that kind of lump sum ever again. If you are relatively young, and manage your mortgage payments now, it makes sense to invest the money and continue with the mortgage. If you pay off the mortgage, you will naturally just expand your day to day spending to the money you then have available each month, and will never save that kind of money again. If you are ever going to want to do something major - like give up a job to set up your own business or follow your dream in some other way (travel round the world?); retrain ?; help out adult dc?, it might be more realistic to invest the lump sum and carry on paying the mortgage.

Or - as suggested - 1/2 and 1/2 or some other proportion (and you get a better interest rate with a lower ltv).

So, mainly, it depends on what life stage you are at.

Meredusoleil · 26/10/2021 22:02

Pay it off in full.

You'd still have nearly £20k left over to save/invest!

Dogsandbabies · 26/10/2021 22:11

Invest your money. You will get a much better return on your investment than the interest you will pay on your mortgage. And if interest rates rise you can always use the money you invested.

As a rule of thumb a FTSE All share portfolio is currently earning around 8-9% and your interest rate is likely to be below 2%. No brainer.

Unreasonabubble · 26/10/2021 22:18

@Dogsandbabies

Invest your money. You will get a much better return on your investment than the interest you will pay on your mortgage. And if interest rates rise you can always use the money you invested.

As a rule of thumb a FTSE All share portfolio is currently earning around 8-9% and your interest rate is likely to be below 2%. No brainer.

Yeah but.... Not many of us know how to actually invest our money to be fair. If I knew that my savings would earn me more than 0.01% and there was a "beginners guide" as to how I could do what you are suggesting, I would be all ears. Thank you.

YaFlamingGallah · 26/10/2021 22:18

@Dogsandbabies

Invest your money. You will get a much better return on your investment than the interest you will pay on your mortgage. And if interest rates rise you can always use the money you invested.

As a rule of thumb a FTSE All share portfolio is currently earning around 8-9% and your interest rate is likely to be below 2%. No brainer.

Dogsandbabies articulates it much better than I did!

Kite22 · 26/10/2021 22:33

What Unreasonabubble said

HalzTangz · 26/10/2021 22:38

Pay it off, no point paying a mortgage if you don't need to. You could always save what you were paying for a retirement fund

EdgeOfTheSky · 27/10/2021 12:23

It depends.

Any penalty for paying it off?

Have you got other debts incurring higher interest rates?

How is your pension pot? You could pay money into a private pension (up to a certain limit) and get the tax contribution from the government, and all of it will grow more than the interest you would be saving on your mortgage.

If you have no other debts, have a healthy pension and pension prospect, then pay off your mortgage.

And decide what to do with the money you have been paying.

Maybe a regular pension contribution?

Stocks and Shared ISA?

A bit on increasing your quality of life?

TheSandgroper · 27/10/2021 12:35

If you pay it off now, assuming no excess charges, you can always borrow against it for other reasons in the future.

And there is the emotional/psychological feelings of owning outright.

Dogsandbabies · 27/10/2021 14:40

@Unreasonabubble @Kite22

Agreed. I learnt how to do it by myself. I read up online and invested from there. I started here:

www.moneysavingexpert.com/savings/stocks-shares-isas/

I don't choose individual shares. I just choose an All share tracker that spreads my investment across the British market. Essentially if the stock market goes up so do my investments. I am currently at earning 9% per annum which is great. And as my mortgage is 1.79% I earn a lot more than I spend on interest.

Duchess379 · 27/10/2021 14:52

My mortgage was £23k and I've paid it off. Mortgage rates are likely to fluctuate so what's the point paying interest to the bank when you aren't earning interest on your lump sum?

senua · 27/10/2021 15:26

It's a lot of money. Worth getting professional advice from an IFA.

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