Why mortgage free?

doctor-dee

I've just come across this forum and can't help but wonder why everyone wants to be mortgage free so badly?

Sure, I can see it being a good feeling to be debt free and own your own home outright. But given such low mortgage interest rates over the last 18-24 months and a recovering stock market it surely made more sense to re-direct spare cash into investments? (Well I know it did because I did it myself and made far more than I would have saved by overpaying the mortgage).

I have now taken out a very sizeable mortgage. My theory being that house prices are depressed (sure they will probably go lower still short term), and also we are facing spiralling inflation which will reduce the 'real cost' of the mortgage going forwards.

This may have been asked and answered many times already so I apologise if that's the case. Just wondered what people's thoughts are on this and reasons for giving back the cheap money early.

katsu

Because the mortgage is still a debt
Because income can go down as well as up
Because mortgage interest rates will rise from their current levels and increase our monthly repayments
Because a lower mortgage/no mortgage makes lots of us feel more secure, as a state to aim for
Because even though mortgage interest rates are lower than loans, you pay the interest over a long period of time so can make considerable savings by reducing the length of your mortgage
Because some of us want to be able to make other life choices - being a SAHM, working part time, early retirement/whatever
Because we don't all want to take the risks of investment - I'd rather pay £1 off my mortgage debt than buy shares and risk ending up with £0.

I'm sure others have more to add...

lincoln-potter

katsu wrote: »

Because the mortgage is still a debt
Because income can go down as well as up
Because mortgage interest rates will rise from their current levels and increase our monthly repayments
Because a lower mortgage/no mortgage makes lots of us feel more secure, as a state to aim for
Because even though mortgage interest rates are lower than loans, you pay the interest over a long period of time so can make considerable savings by reducing the length of your mortgage
Because some of us want to be able to make other life choices - being a SAHM, working part time, early retirement/whatever
Because we don't all want to take the risks of investment - I'd rather pay £1 off my mortgage debt than buy shares and risk ending up with £0.

I'm sure others have more to add...

Hit the nail on the head!

Security is the main reason.

liuhut

For me, I wannt to pay it off early so that I will know that no matter what happened I own the house outright, that I have no one to answer to and to prove to myself that we can save money every month. PLUS interest rates are so low that I dont want it sat in the bank and I lost money on shares a few years ago and had my fingers burnt!
I might take on another mortgage here in Oz but for the moment I'm more than happy knocking years off the current one.

HappyMJ

doctor-dee wrote: »

I've just come across this forum and can't help but wonder why everyone wants to be mortgage free so badly?

Sure, I can see it being a good feeling to be debt free and own your own home outright. But given such low mortgage interest rates over the last 18-24 months and a recovering stock market it surely made more sense to re-direct spare cash into investments? (Well I know it did because I did it myself and made far more than I would have saved by overpaying the mortgage).

I have now taken out a very sizeable mortgage. My theory being that house prices are depressed (sure they will probably go lower still short term), and also we are facing spiralling inflation which will reduce the 'real cost' of the mortgage going forwards.

This may have been asked and answered many times already so I apologise if that's the case. Just wondered what people's thoughts are on this and reasons for giving back the cheap money early.

I don't want to give back the cheap money early and have accounts where the interest rate paid on saving is higher than I'm paying on my mortgage but those accounts are very limited. It's hard finding savings accounts paying more than the mortgage interest rate plus tax. Currently paying 3.75% on the mortgage. I need to find an account earning more than 4.7% to be better off. I have all the regular savers so the last thing left is to pay the mortgage off.

As with last poster I've lost money on shares before and will never gamble on them again. My pension fund can do it on my behalf but I'll never directly invest in shares again.

Jonbvn

OP,

Good question.

IMHO, because many posters on here are very single minded about being MFW and have missed the big picture wrt their finances.

getmore4less

The other way to look at this is

If you had a house, mortgage free, would you get a mortgage to invest.

it's fundimentaly the same thing.

originalmiscellany

As other posters have said, it's planning for the long term - when we have children, I'd love to be in a position where we are able to support and bring them up not worrying about mortgage rates (speak to our previous generation with their 14% rates) because we've cleared a good chunk of it.
As others say, debt is debt is debt, and I was brought up to live within your means, so clearing all debt is a priority, and this has carried over to viewing the mortgage as a debt, and one that we're actively trying to clear, as even just a few percent on a loan for 25 years ends up being a large amount.
We plan to be mortgage free some point next year if we can help it, and knowing that say 900 hundred pounds in your account are yours to use as you see fit rather than being taken by the bank will be a most wonderful feeling!

originalmiscellany

And there's the great phrase someone has here in their footer - I paraphrase - "It's sensible to fix the roof whilst it's still sunny" - e.g. you'd be a fool not to save/overpay now when rates are so good

LilacPixie

Security is the main reason for me.. I have three young children ranging from 4 years to 8 days old and having a warm and comfortable home to raise them in is important to me. I cannot beat my current mortgage rate with a savings account at the moment so th overpayments go to the mortgage. I am looking at using a small monthly amount of around £100 fr stocks and shares but only because it is a figure we feel is worth the risk..

Inflation will only reduce the 'real cost' of a mortgage if we get wage increases in line with 'inflation' and TBH with the economy in the state its in I don't think 5%+ wage increases are on the horizon. That adds another issue that as prices of utilities, food etc rises but wages stay the same there is less disposable income to invest or overpay so many people are hoping to benefit from compound interest savings ove rthe remaining term of the mortgage I know I am.

I had to take out a new product 2 months ago as we bought a larger house and I am fixed at 5.99% for 2 years mortgage over 25 years. once the 2 years is up OH student loans will be done as will some other bits of 0% finance so I am hoping to be able to go for an offset mortgage at that time.. To do that I need to improve our LTV and with stagnant or falling prices we NEED to make overpayments to stand a chance of making the magic 75% plus some luck that they don't change the LTV requirments that drastically.

Luv2Budget

Everything Katsu said, especially security.

Also the amount saved in interest. If I can clear my mortgage in around 3 years time, I would have saved myself approx £70k interest - that is a lot of money that won't be going to the bank and very satisfying...