DON'T Pay Your Mortgage Off Early!!!

Sloppy_Saver

Controversial title for this forum thread admittedly, but hear me out!

I, like most of the people here only have a finite amount of cash left after bills and such. The question is how to make the best use of that money over my financial lifetime.

Many people on this thread (and I'm not excluding myself here) have an almost religious fervour attached to paying off their mortgages and use every last penny to do it. Usually this will be over a period of several years, say 10 on average? At the end of that time they're 10 years older, 10 years closer to retirement and have invested all of their money in a single investment.... hmnn, I bet you can see where I'm going here?

Without fail, ALL of the financial websites I've ever been on have agreed on one thing, the earlier you start paying towards a pension the better off you'll be. The later you start one, the greater the amount you will have to invest.
Basically, If you lose 8/10/12 years, you'll never get them back and unless you can trade down to a smaller house, no real way of getting back any of your investment.

(NB. By pension, I mean any savings vehicle whatsoever that you can use to let you retire before you drop dead at 66, 75 or whatever the age you'll have to be before getting your state stipend).

Instead, should we just make sure that our mortgages (and we'll have several over our lifetime, unless you're fortunate enough to buy the perfect house as a starter home) all end on the day before we retire (60 for me). We then use the overpayment money to invest in savings, funds, stocks, gilts, whatever, to fund our glorious retirement.

Now, I think we've all seen sense and should now all leave this thread and move across to the Pensions & Annuities one.. come on.. follow me!!

dumpy

I think the problem I have is that I don't have a job for life, I'm on a series of short term contracts and so I'm trying to pay the Mortgage off as soon as possible so I have somewhere to live. I can live day to day (OS) very cheaply and although CT is a pain I could cope on very little IF I and family had somewhere to live.

You are lucky if you can plan that you will be able to retire at 60, it's just not possible for me.

I'm facing redundancy at the moment and the only pro I have at the moment is that because of the over payments I have made in the past, my mortagage payments could be covered by my part time job. If I hadn't done the overpayments I probably wouldn't be able to cover my mortagage.

I'm paying for security of somewhere to live. Once I have this I will put all my mortgage money and over payments into looking to the future.

hilstep2000

I'm sorry, but you don't know what's around the corner! Two years ago, I was diagnosed with MS. I had a critical illness policy which paid out, so I paid off my mortgage straight away, so that if I get to the point when I can't work at all, at least no one can throw me out of my home.
I couldn't care less if I have a pension or not (I have a small one) but I do care what happens to me now. I live each day FOR TODAY, and don't think about tomorrow if I don't have to.
The way most pensions have performed, I think you'd be better off putting your money into bricks and mortar. My house has trebled in 10 years, how many pensions have done that?!

Sloppy_Saver

hilstep2000 wrote:

I'm sorry, but you don't know what's around the corner! Two years ago, I was diagnosed with MS. I had a critical illness policy which paid out, so I paid off my mortgage straight away, so that if I get to the point when I can't work at all, at least no one can throw me out of my home.
I couldn't care less if I have a pension or not (I have a small one) but I do care what happens to me now. I live each day FOR TODAY, and don't think about tomorrow if I don't have to.
The way most pensions have performed, I think you'd be better off putting your money into bricks and mortar. My house has trebled in 10 years, how many pensions have done that?!

Actually, my pension value has gone from 17k four years ago to 70k now, though I was buying shares when the market was on the floor. The difference is that when I finally stop working, I can spend my gains.

Also, your circumstances are a little different to others in this forum in that you didn't scrimp and save every penny to place it in a single investment. I think if any of us had our livelyhoods threatened by illness we'd do the same as you.

The issue that I raised (admittedly in a lighthearted way). If you just live for today's problem, tomorrow's problem will be the poverty you'll be in when you retire.

Better to pay off a little, save a little and spend a little.

comping_cat

I think it should be whatever is best for you.
In my case, i would like to pay my mortgage off ASAP as i am a single mum, and one day would like to be able to help my children, in whatever they do. Im 35 at the moment, and im hoping that the mortgage will be paid in 10 - 12 years, when my oldest will be 20 - 22, and i will be 45 - 47. I will then have the mortgage money free, to spend or save and still be a few years from retiring - i already pay into a small pension, but would then be able to pay more if i wanted or needed to.
Also, yes, property values can go down, but if i had no mortgage, ALL the sale proceeds would be mine, even if it was less than what i paid, and i would have no worries about being repossesed as i wouldnt have the mortgage!!!

Sloppy_Saver

Al_Mac wrote:

I think you've simplified it all a little Don't think it says anywhere to forget your future

This is so true, but then controversy elicites response!

I do believe though that the general case I put is true - sometimes when you focus too much on one "problem", you lose sight of other ones.

If every penny is invested in the mortgage:

What happens if you lose your job. Just because you've overpaid doesn't mean your mortgage provider will grant you payment holidays until your overpayment is used up.

How will you hold onto it in retirement when the council tax demands, insurance payments, utility bills, home maintenance costs, etc. start mounting up and your debts have to be paid by using your single asset?

comping_cat

What happens if you lose your job. Just because you've overpaid doesn't mean your mortgage provider will grant you payment holidays until your overpayment is used up

Just wanted to add, with my mortgage, any overpayments can be borrowed back, or used as a repayment holiday, so i dont have that worry. If i needed some money in a hurry, i can also withdraw it with no penalties - i know not all mortgages are like this, but its good that mine is like that.

alanobrien

Well personally i want security for the wife and kids, and that means owing as little as possible to any organisation. Given the mortgage is the biggest debt for most people that is the obvious target to clear.

In modern society where your job is likely to be outsourced to a cheaper country at any minute its the only way to be imho so i will continue to focus on getting rid of the mortgage milstone asap

alanobrien

Al_Mac wrote:

I also have a final salary pension. So I'm alright jack.

Me to and i truly hope your right but i suspect that most if not all of these schemes will close before i get to draw it

Sloppy_Saver

If everyone thinks the mortgage is a milestone, then why not rent and get rid of it completely?

If you're paying £1500 quid a month for your first home, look at rightmove.com and see what sort of palace you can live in (at least Oop Norff where ah live) for that much. Also, if you're paying £1500 a month, most of it will be interest and you're only investing probably 200 quid actually on the mortgage balance.

House prices are going to crash. Lets all rent and ride out the storm!

[Deleted User]

I'm one of the people totally focussed on getting rid of my mortgage - and now have it down to a few months left. I'm also living on the bare minumum now the nearer I get to the Big Day.

I have however paid into a pension of some sort or another since the age of 16 - admittedly only paying in about 5% of my salary.

When the mortgage is gone I'll be able to pay more in.

But by concentrating on the mortgage it means I get rid of it forever.

I'll also then have choices.

Like going part time and working locally.

The things I have gone without meanwhile include holidays, latest gadgets, large TVs, frivolous clothes shopping, and anything else not deemed essential.

I don't feel I have missed out. Or done things the wrong way round. I do take your point about the importance of pensions though.

When I started work at the age of 16 it was compulsory to pay into the scheme. I'm so glad it was.

Say the word 'pension' to the average 16 year old they probably think 'blue-rinse granny queuing at the post office!'

I was the same.

Until pensions become compulsory, most people either won't budget for them and cut back on something else or will leave it too late.

I have little knowledge of pensions and find them incredibly boring to talk about. My eyes glaze over if someone tries to explain the intricacies to me - I can't help it!

Until the pensions industry find a way of 'sexing up' pensions and simplifying the whole subject for the average person - they will just pass many people by as being complex things for financial whizzes to wax lyrical about and for grannies to collect.