Help - why do I want to be mortgage free?

silvercar

I think you need to be able to live a little, after all we only have one life. getting the balance right between spending and saving and the future is important.

we have an offset mortgage, so that if we need to get at any of the money that we have put aside to clear the mortgage it is there waiting for us.

Problem is we did better than we thought, cleared one mortgage. on the back of that success we moved to a bigger house in a nicer area and a mortgage three times the size of the old one!

goonlord

Thanks so much for starting this thread. I am a MFW but have just had to reduce my overpayments as I couldn't really afford to pay off as much as I ambitiously decided I could! So this was making me a bit down and wondering whether it was all worth it but the posts on here have convinced me that it is (and that every little helps!).

I sold my flat and bought a house earlier this year, doubled my mortgage and had to take out a 30yr mortgage to afford the repayments. I know I won't be there for 30 yrs but it would be great to get the mortgage down anyway!

cupid_s

Aaaaarrrrgggghhhhh! I've created a MFW monster.

I have been reading everyone's replies avidly and the thing about getting the balance right between saving and actually having a life struck a chord. So I mentioned to hubby about having some well deserved holidays after our PhDs (I have nearly quit on more than one occasion and it's made me so stressed I got a stomach ulcer at 23 - so if I get through it in one piece I honestly don't care if I spend a bit of money on us) before we have kids. There are loads of places I have always wanted to go, and even more that I've been to before and am dying to go back to. He said 'but i'm not bothered about going to these places, I'd rather pay the money off the mortgage'!

I suppose I can't really moan for him adopting my MFW views. My constant overpayment calculations must have gotten to him. And he was so bad with money before going out with me it's like a miracle has happened.

At the moment we have a regular savings account and that will go to pay off the mortgage next august (when the fixed term ends), we are also saving more than we can really afford but cannot reduce our payments as we are tied in for a year and so it's a bit of a worry, though we manage just about!

When fixed time is up we might consider an offset mortgage. It sounds a good idea and hopefully it'll help us pay our mortgage off more quickly and once we are MF we will need to buy a bigger house as ours wont really big enough for me, OH, all our pets and two kids once they get past about 3, and I want to move closer to our parents. But then we can start all over again, with a mortage twice the size of this one

tillson

Thanks to a bit of good fortune, I am able to pay off my outstanding morgage debt of £50000.00. I don't have any other debts at a higher rate of interest and will have a bit of money left over once the morgage has gone.

Will paying off the morgage represent the best use of the money? I don't fancy investing in anything high risk. My present morgage interest rate is 5.7%, so I think I would need to see about 6.9% pre tax return on any other sort of investment to equal paying off the morgage.

I have checked with the Building Societyand I do not have any penalties to pay for clearing the debt early.

Any advice / suggestions?

Thanks

David_B_2

cupid_stunt wrote:

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).

Everyone goes through a spell like this mainly because it's not a overnight fix and takes a time. Yes we could all find reasons to stop and NOT pay it off early but then in 25 years time we'll still have it and I'm betting you'll regret it after 2010 (your current free date).

My wife and I have got something nice we are going to treat ourselves to and this alone helps a lot. As well as she/we to would like to spend more time at home when our young son starts school and be there to pick him up. Plus have the security of owning our house for his sake as much as ours.

Head up, keep going and don't let the banks win by getting 25 years of interest off you!!

PS: Nice username, does it mean what I think it does (i.e.: something you'd say to somebody you don't really like)

jamesd

tillson, you're only going to find stock market type of investments that will significantly exceed your mortgage interest rate, so if you don't like that level of risk, paying the money against the mortgage looks like a good idea. You could then use regular saver accounts or ISA investing with the former mortgage payments.

dwsjarcmcd

We become mortgage free today!!
We have a large house and while on holiday this year we visited the south of France and decided to downsize and look to buy a 2nd home around Nice. The house went on the market early Sept and sold for a great price and we complete today.
Will clear our mortgage, pay for the new house and leave a good few quid in the building society!
We will have a lot of fun househuntng in France over the next few years. Will look to buy in about 3 years when we have saved a bit more, the dreaded endowment matures and my maintenance payments (£1610 per month!!!) to my ex-wife stop.
A great day for us!

Tim_L

jamesd wrote:

tillson, you're only going to find stock market type of investments that will significantly exceed your mortgage interest rate, so if you don't like that level of risk, paying the money against the mortgage looks like a good idea. You could then use regular saver accounts or ISA investing with the former mortgage payments.

This is absolutely not true, and has to be the no. 1 top myth of savings and investments. There is a continuum of investment risk, and stock market investments are at the top end. There are products with lesser risk which are certainly able to produce returns greater than mortgage rates.

In fact possibly the most risky investment you can make at the moment is in residential property. Yet in sinking money into paying off a mortgage this is essentially what you are doing. It's also the most illiquid investment you can make, because to get access to your money you have to sell up or remortgage. At times of need both can be very difficult to do. In the worst case - a housing dip coupled with (say) a period of illness or unemployment - you are absolutely stuffed. Yes, you have a house, but you can't pay grocery bills with bricks and mortar.

Incidentally, regular savings schemes are usually pretty dire in terms of the amounts you can put in and the interest you get on them - usually just for 12 months after which the capital is transferred to a bad rate savings account. They can be used to some extent to maximise savings returns, but even when there are high headline rates, the absolute gains are small in comparison with just leaving the same money in a decent rate standard account and probably not worth the hassle. Obviously cash ISAs are a decent first point of call for saving - £6000 a year for a couple.

As I've said before, the maximum flexibility you can have is to build savings that are equal to your outstanding mortgage. This gives you the advantage of having the ability to pay off the mortgage if you want to, but also a large pool of accessible cash for anything it is needed for. This is a price worth paying even if you can't quite exceed mortgage rates with savings rates.

Wanting to be mortgage free is essentially an emotional reaction to having a long term debt - a monkey on your back - but it is astonishingly cheap debt and worth having. I've been in the position where I could pay off my mortgage for several years, and originally had the intention of doing so, but it seems much less important to me now, and the mixture of investments and savings I have is building my wealth nicely. My mortgage - which now costs me nothing overall - will be paid off anyway in 7 years.

I worry that on this board in particular, the emotional side of wanting to be mortgage free, particularly from those aspiring to mortgage free status or who have just achieved it and who are quite rightly proud of their achievement in generating the cash to do it, is not often countered by the voice of financial rationalism. It is possible to do the wrong thing for the right reasons.

jamesd

Tim_L, you might try suggesting something with less risk than bonds but more risk than savings accounts, though many people here won't want any greater risk than savings accounts - often people just don't trust the unpredictability. That desire for certainty seems to go hand in hand with the desire to be mortgage free, which I suppose isn't a surprising combination.

I agree with you that investing is a good idea, and personally I'll go with interest only and investing. To me, getting a lump sum and just putting it into the mortgage seems like a lost opportunity, but if that's the risk tolerance of the person concerned, so be it.

If you want a greater reason to be dismayed, you might look at the utter rubbish in the calculations from a mortgage adviser here.

tillson

Thanks jamesd and Tim_L, some very good points made.