Grandparents

Pete111

One of my Grandmothers was a pretty good businesswoman.

When I mentioned that our current aim was to pay off our mortgage in the next few years (385k in 08 down to 230k and falling) she replied that you 'don't want to pay off your mortgage - it's usually one of the cheapest loans you can get!'

I suspect she was in the minority of her generation but she made plenty of money back in the day and is now sitting pretty in her old age so perhaps it's good advice!?!

chucknorris

Pete111 wrote: »

One of my Grandmothers was a pretty good businesswoman.

When I mentioned that our current aim was to pay off our mortgage in the next few years (385k in 08 down to 230k and falling) she replied that you 'don't want to pay off your mortgage - it's usually one of the cheapest loans you can get!'

I suspect she was in the minority of her generation but she made plenty of money back in the day and is now sitting pretty in her old age so perhaps it's good advice!?!

A woman ahead of her time

Blacklight

Total UK personal debt at the end of May 2010 stood at £1,460 billion.

Average owed by every UK adult is £30,000 (including mortgages). This is 126% of average earnings.

Which is as meaningless as saying out of the £3,923bn worth of housing in the UK, every adult owns £81,000. Or holds assets worth 3.5x average wages.

According to you there's no need to do anything about poverty and nobody has cause to be on benefits. It's all lies. They could just sell up.

Well done.

You should go into politics.

beecher2

Pete111 wrote: »

I suspect she was in the minority of her generation but she made plenty of money back in the day and is now sitting pretty in her old age so perhaps it's good advice!?!

I don't think it is good advice at all - what's the point in paying interest you don't have to? Isn't really logical to say that you shouldn't pay it off because it is cheaper than a loan.

chucknorris

beecher2 wrote: »

I don't think it is good advice at all - what's the point in paying interest you don't have to? Isn't really logical to say that you shouldn't pay it off because it is cheaper than a loan.

Because if you keep cash (instead of paying off the mortgage) you are free to invest in good business opportunties when they present themselves, that's why.

Don't forget that you only pay the difference between your mortgage and savings rate, not the full mortgage rate (although in these unusual times I am actually earning about 3% more atm on my savings)

Pete111

beecher2 wrote: »

I don't think it is good advice at all - what's the point in paying interest you don't have to? Isn't really logical to say that you shouldn't pay it off because it is cheaper than a loan.

I personally agree hence why we are paying off the mortgage asap - However I am not a risk taker!

She was, so she leveraged herself (assumedly via a big mortgage)and started a business that expanded quickly and made her a lot of cash. Others would not be so lucky I guess! (or more likely they would waste the money on fancy cars and flash holidays instead....)

chucky

beecher2 wrote: »

I don't think it is good advice at all - what's the point in paying interest you don't have to? Isn't really logical to say that you shouldn't pay it off because it is cheaper than a loan.

because the opportunity cost of not doing this is not contributing to your pension fund or not contributing to your ISA.

the earlier you do this the more benefit there is of your investments or pensions 'compounding' which in turn the benefit will be excess of your mortgage interest.

i read something yeasterday that just contributing to your pension from 20-29 and not paying in anymore is better than having contributed from 40-65 due to the fund 'compunding'. so imagine what you can do if you contribute to it consistently from age 25 while comfortably paying off that mortgage debt.

beecher2

I suppose it depends on the individual - becoming mortgage free was the best option for me personally, but wouldn't be for others.

chucky

beecher2 wrote: »

I suppose it depends on the individual - becoming mortgage free was the best option for me personally, but wouldn't be for others.

yes you're right, i should have said that. it also depends on disposable income too and the size of your mortgage.

a 100% mortgage wouldn't be the best approach in my example... but one with a lower LTV would...

ALIBOBSY

I agree that you should prioritise clearing higher interest debt first, but the one thing that is different about a mortgage is that for most of us it is attached to our home. So clearing it means you have the security of an unmortgaged home. Not sure you could put a price on that, especially in the next few years.

Probably the answer is do the moneysavers diet as per martin, prioritise the higher interest debt then mortgage, but I would also look to buildt up some savings as well.

ali x