Pay off Mortgage ASAP - is this wise?

blackice_2

I had a mortgage of £72K I paid of £22K lump some bringing it to £50K, I increased payments to £520 a month now it clears in 10 years instead of 22 years!

I intend to make overpayments of 10% per annum, this should bring it down to 5/6 years to pay off the lot...

Is this the best thing to do financially as some people seem to think it is better to have a mortgage and not pay off and keep money in the bank at a higher rate???

Surely it is best to clear your mortgage asap, I will be 40 when it clears and got a fair sized house so quite happy.

What do you guys think?

Fairdo_2

Absolutely.

If you are in a position to bring your mortgage balance down, then do it!!!!

There may be an argument for keeping £1 in your mortgage once you have got to that stage, in case you need to borrow further money later on. This is only a minor point, but some lenders do prefer that you "Re-Mortgage" if you are borrowing again, rather than borrow on a new mortgage against an unencumbered property.

The longer you borrow, the more you pay, so bring it right down as soon as you can and you then give yourself the choice.

herbiesjp

I agree

I think most people would want to be in your position.

The longer you have the mortgage the more interst you will have to pay on the loan - so it seems to make sense to pay off as quickly as possible, and then take advantage of this fact


Very soon you will have no mortgage on your property - just make sure there are no penalties for full redemption or any other hidden fees.

Once you have cleared the mortgage, rather than monthly mortgage payments, you will need the discipline to put the money away for a rainy day, and then take advantage of the best rates you can find.

You can probably find a lot of help with this on the savings board.

Well done!

alared

I entirely agree,a mortgage is a DEBT,get rid of it

blackice_2

Thanks for your input.

Basically I saved up the £20K over a few years to know it down initally and then by upping monthly payments I decreased the years a lot.

I intend to pay off the 10% per annum with any bonuses or money I make part time.

It will be tough to do, but I really set my heart on paying it off early so I can provide for my family better.

I agree that it is better to pay off, but a number of people have scoffed this saying it is better to have the money in the bank, which I can't see when you will get a lower rate than you are already paying for a mortgage.

Thanks Again

Robert_Sterling_3

Yes. Pay it off.

Unbelievable_2

Yes pay it off. After you've done that you'll soon have money in the bank as well!

Reaper

If you are currently on a discounted rate it may be possible to earn more interest on your savings (eg in a cash ISA) than you are paying in interest on your mortgage. If this is the case then save until the discount runs out.

Also you can not usually get overpayment money back unless it is a flexible/offset deal. So make sure you have sufficient savings to meet the unexpected.

Generally, however, I agree and have been doing much the same myself.

Robert_Sterling_3

As Reaper says there are pros and cons but having it paid off as mine now is gives may give you a "feel good" factor.
P.S. I still owe the Halifax a £1 ... It was at their suggestion.

foot_loose

m8 if i was you i would buy another house with that cash somewhere like liverpool rent it out to the cancel and let the rent pay for your mortgage.
because in 20years time your weekly shopping will cost you 25000

also personal i use other peoples money and keep my own.

cloud_dog

Thanks for your input.

Basically I saved up the £20K over a few years to know it down initally and then by upping monthly payments I decreased the years a lot.

I intend to pay off the 10% per annum with any bonuses or money I make part time.

It will be tough to do, but I really set my heart on paying it off early so I can provide for my family better.

I agree that it is better to pay off, but a number of people have scoffed this saying it is better to have the money in the bank, which I can't see when you will get a lower rate than you are already paying for a mortgage.

Thanks Again

Mike

To answer this question you need to decide on what is *the* most important aspect to this, and that is not the "I want to pay it off as soon as possible".  I think the question is whether psycologically are you more comfortable with a smaller and reducing mortgage or are you happier knowing you are getting the best financial returns from your capital.

At a simplistic level if you can achieve a  savings rate in excess of your mortgage then you would be better off saving your money rather than actually repaying your mortgage.  The money could be saved (or off-set if appropriate) in account designeated for your mortgage.

Our savings are in my wife's name, as she pays no income tax) and that way we 'earn' more from our savings that we would save from over-paying our mortgage.  But, in a similar vain we have a savings account designated for mortgage reduction (bonuses, etc) as we re-mortgage, or when we seee fit we repay a large chunk of the mortgage (exactly in the same way you did with your £22k).

Again, the question is how can you get the best return from your capital.  If, however, psycologically you feel more comfortable repaying / over-paying the mortgage then go for it and live in the knowledge that your biggest debt will soon be gone :-)

cloud_dog