whats the acid test of being mortgage free?

de1amo

İ have done a SOA which revealed that my mortgage is about the same as my disposable assets---does this equate to being mortgage free??

originalmiscellany

To some degree yes to some degrees no...
If you have loads of savings tucked away in say 20 year schemes, then you may not feel mortgage free - It's probably similar to an owner of a million pound painting but he can't afford a can of coke, cos despite him being technically wealthy he can't get to his money or enjoy the benefits of his painting.
So if you're able to live a life where you aren't worried by your mortgage, and where you can easily get the money to cover your total mortgage costs, then yes, I would say you've done it!

So well done, but I don't think I'm 100% right!

RosieTiger

I think in your case, mortgage free is in the eye of the beholder!!
If you feel you are, then you are. Others might want to keep their savings and get the mortgage clear to zero. Also depends what you mean by disposable assets, I could say the same thing now, but would not wnat to get rid of my assets.
Either way, you seem to be in a good position then, so well done.

de1amo

i have 2 homes and a pension that covers the running costs and mortgage on one off them--i am 47--i have equity of about 1,75 with the mortgage being the ,25

---

a small part of the equitable assets is a slowly evolving business that i own abroad which provides a decent income to live on

pawlala

If you are tied in to a fixed deal and can't overpay without penalty, but you have more savings than mortgage, then yes I believe you could say you are mortgage free as long as you could clear that debt at the first available opportunity (penalty or no penalty)

de1amo

i have no tie in to my mortgage but my savings earn 4.5pc before tax and my mortgage is 2pc so there is no point paying off my mortgage because i am making on the deal!-i have some gold as well which yoy has far exceeeded my mortgage--the last 6 months it has gone up 20pc!--so really paying off my mortgage isnt attractive because the assets are working harder than the 2pc interest rate

getmore4less

de1amo wrote: »

İ have done a SOA which revealed that my mortgage is about the same as my disposable assets---does this equate to being mortgage free??

It depends on how you value the assets.

Illiquid assets have much lower value in a fire sale.


a small part of the equitable assets is a slowly evolving business that i own abroad which provides a decent income to live on

are you measuring this on the forward income or the how much would someone pay for it tommorow basis?


Reasonable measures are overall is net wealth and net weath not including the place you live(or part of it if much too big).

the latter is the pot you have to live off and still have a roof over your head.

Any income streams also have value so pension and business income.


You can convert assets to an equivilent income stream and income streams to the equivilent asset value.

Depends what the goal is, for many retirement and sufficient income is the goal.

A simple conversion factor is return rate, eg if assets can return 5% then thats a factor of 20

£100k can produce £5k income, £1k income is equivilent to £20k capital

So if the retirement goal is to get £20kpy income and you think a 5% return over inflation is reasonable then a pot of £400k will do it if the return is only 4% then you need £1/2 million.

de1amo

the business is easily saleable to my business partner and is valued every year for accounting process so its accurate- the other items i have included in my assets are actual values that i could get for them not 'dream' prices- i have a pot of gold etc--all my foreign assets are saleable because i could recoil back to the uk if necessary--i actually receive a pension that has an annuity value of about 130k(7800 income) according to this site- so a base income is secured--if i sold my everything abroad and all my liquidable assets i would have about 80k leftover after clearing my uk mortgage-
-if necessary i have the option of renting out one of my homes to raise income!--it would far exceed rates of about 5 times the 2pc i pay now--if we hit 10pc interest rates my savings income would grow accordingly--i have a pot of gold i dont include in my signature and that wouold ramp up with inflation