Help - why do I want to be mortgage free?

cupid_s

I was just about to type a reply to a thread when everything I was typing made me wonder why I'm bothering to try to pay off my mortgage early so I need some inspiration/help to get me back on track please. And I'm sorry to be so long winded about all this.

I am 24, so is OH. We bought our house for 100k in september 04, taking out a mortgage of 71k. We are currently on target to become mortgage free in 2010.

I reckon I want to be mortgage free mainly so I can go on ridiculously expensive holidays without feeling like I have anything else I should be spending my money on instead.

I also want to be able to afford to stay home with my children, when I have some, for a while. Also we need to do pension contributions and save for kids futures etc, but we could do all this with our current mortgage on OHs potential salary easily anyway (I say potential as neither of us actually have jobs, we're both students but OH has a job offer for when we finish our PhDs).

But... why am I bothering. I could just spend my overpayments on holidays instead and what would be the difference really (apart from interest payments).

jet77

Have you tried redoing the overpayment calculator and seeing how much you are saving yourself by overpaying?

cupid_s

yep. I've increased my monthly payment by £87 and I'm saving £16800 in interest and 6 and a quarter years. It's great and I was well excited but I'm now thinking why?

I just don't see myself doing anything different once I'm mortgage free to what I could do with a mortgage

MatthewN

I just got a mortgage for 100k and I believe if I take it to the end then I pay back 200k (or 201k). So basically I dont want to waste 101 thousand on interest. Id rather have that in my pocket or if I pay the mortgage early then carry on putting money in to a pension for when Im older.

comping_cat

I think you have answered your own question, in 4 - 5 years time you will be in a position to have the expensive holidays, be home with your children, and you will still be young enough to enjoy them!!!!
You would be in a position where you owned your home, not the bank and that you paid a lot less in interest to them than if you just let the mortgage carry on for its full term.

watcherman

I think it is all a question of balance, I am all for living on bread and water till the mortgage is paid off, where as my wife insists we overpay to a degree, but still have an annual holiday, buy some luxuries etc.

She is right, there must be some living to go with the MFW in me, at 24 you're doing the sensible thing, but if your MF by 28 or 30, it is still a wonderful achievement, but just remember to live a little along the way....especially before the little one's come along

matty2767

i agree watcherman. you need to overpay but balance with the missus and her need to shop

she thinks we should enjoy ourselves to some extent but wont be complaining when it is paid off.

Tim_L

There is no rational reason to want to be mortgage free, though it's a very sensible aspiration to want to have savings that are equal to your mortgage in as short a period as possible.

Locking your capital in your house where it can't be got at - almost by definition when it's needed, remortgaging will be difficult - is a bad option when you can easily beat mortgage rates with (say) cash ISAs - two cash isas will allow £6K of offset savings for a couple, and there are plenty of other savings products that can get very close to mortgage rates.

At the point where you start considering other forms of investments, the opportunity cost of sinking your money into your house can be much more significant.

The idea of being mortgage free is mostly an emotional response to having a big and ugly monkey on your back. Nothing wrong with this, but there is no practical difference to having savings and a mortgage and no mortgage and no savings, except that having savings gives you a lot more flexibility.

thriftmummy

I do know how you feel because I have been feeling the same way recently. I currently have 19 years left on my mortgage and if I overpay by £250 per month it will reduce this to 10 years. This seems like a lot of money to pay for the next 10 years. I feel a bit like I will be putting my life on hold till the mortgage is paid off.
The one thing that would make it all worthwhile would be the opportunity to be mortgage free when you start a family. I do wish this is something we could have done as I returned to work when my little one was 6 months old. Had we had no mortgage I could have easily stayed at home with him.

tiff

When you're mortgage free you wont have that massive debt hanging over you, that should be inspiration enough to keep going!

If your circumstances change in the future, you will have a lot less to worry about.

save-a-lot

tiff wrote:

If your circumstances change in the future, you will have a lot less to worry about.

I totally agree with that, whilst you have the ability to do this you should make a big dent in the mortgage balance. The alternative way to do this is save your money into savings and ISA's that beat your mortgage rate then pay off the mortgage in a lump sum whenever it becomes appropriate.

For us we have a £74K mortgage on a 10 year fixed deal at 4.67% and we have reasonably substantial savings so it is easy for us to find products that pay more than our mortgage rate. The benefit of this against overpaying is that if you really need the money it is there accessible to you. The plan we have is to see the 10 year fixed rate through to the end and then pay off the mortgage.