Does being a MFW currently make sense?

Looking at mortgages in isolation.
I've seen the 'interest rates are low I'll pay my mortgage off when they are higher' argument before. It is dead wrong. When interest rates are low it is when you have the most disposable income to make extra payments. If you wait for interest rates to rise (the argument being that it is now worth paying off the interest) that is when your disposable income falls, so you end up paying off less. Making the extra payments when interest rates are low is definately the way to do it.

Looking at the wider issue.
Paying off higher interest debt is generally the way to go. You might have a siuation where you have a choice between paying off higher interest but fixed rate debt VRS paying off lower interest rate but likely to increase debt. Thats trickier as there is no golden rule but as a rule of thumb pay off the highest CURRENT rate first and you won't go far wrong.



Darren

AnotherJoe wrote: »

Instead of saving as an alternative you can contribute to a pension and get tax breaks, there are many people in this forum wasting literally many tens of thousands of pounds by overpaying low rate mortgages and paying high rate tax instead. That would be a better alternative than "spending all you earn" .

I can see the benefit of tax relief at 40% and getting a pension taxed lower. But in that scenario, you are still in the situation where you're performing two tasks.

1. Pay into a pension
2. Pay off a mortgage

The choice comes from which way round you're doing it.

If you pay the mortgage off early, you have more money to throw at the pension (the interest rate saved). If you pay the pension early, you're relying on the pension gaining at a higher rate than the mortgage interest rate, and of course, don't forget the risk premium.

People seem to *always* forget to price in risk.

AnotherJoe wrote: »

And even at standard tax relief rates, there are many scenarios where paying off early is not the best financial strategy.

Such as?

AnotherJoe wrote: »

As always there's a happy medium between an interest only mortgage and shoving everything into a pension and living on baked beans for ten years whilst you pay the mortgage off. The person who took the middle position of paying off over a standard time of say 25 years whilst maximising tax breaks (especially if 40% is available) is almost certain to come out far better financially

"Almost certain"? So why do a hundred thousand+ families lose their home every time there's a recession? (which happen on-average 10-15 years apart)

Is your definition of "almost certain" different to mine?

AnotherJoe wrote: »

and also gain the advantage of inflation whittling down their mortage as well.

And unless they have defined benefit (or even if they do) whittles down their pension as well.

Lungboy wrote: »

My wife is adamant she wants to pay down the mortgage though,

You should have said that right at the beginning, then I could have told you what you would be doing...