DON'T Pay Your Mortgage Off Early!!!

Gray0103

As far as I can see this is all about choice.

My wife and I want to pay off our mortgage early, whilst we are doing this we are still contributing to our pensions, my wife has a works pension, and I have a stakeholder.

We have no other debt apart from the mortgage, at this stage in our lives (child free and just turned 30) we can pay more off the mortgage, we have no need for a bigger house. This then allows us to either reduce the term or the payment amount for when we have less money coming into the house (maternity leave/part time work, etc).

Thats why we are doing it, basically paying more when we can, to help when we can't.

cupid_s

Sloppy_Saver wrote:

I'm confused, how can you pay off a 67k mortgage in 4 years (you said in your post that you're currently 24 and it'll be paid by 28), if you don't have jobs at the moment?

We have some savings that we will pay off the mortgage when it becomes unfixed in august. We've saved these over the past 2 and a half years since buying the house but couldn't make big overpayments because the mortgage was fixed and they've been in a high interest account (but still getting less than we're paying on mortgage).

Husband already has a job lined up for when he finishes his PhD in october. I am currently looking and hoping (not unreasonably) I'll have something by next April (gives me 6 months after my PhD finishes to find something). So from then we will massively increase our payments and will be mortgage free by 2010. If it doesn't take me a full 6 months to get a job then it might be a bit earlier.

Tim_L

This is getting subverted into a thread about paying off mortgages v. pensions, which is not really the point as far as I am concerned, except in the sense that pensions have some advantages as a savings vehicle.

Fundamentally you get more choice by keeping your mortgage but fully offsetting it with savings and investments. At the point where you have full equivalence you have all the advantages of being mortgage free, but you also have a pot of money with which you can build wealth, or into which you can dip if you need it. Basically the same principle as having a fully offset offset mortgage, but I'd contend there are cheaper mortgages and better perfoming investments to build a similar situation with.

That is much more choice than you have if you just own a house, but perhaps requires a much more multidimensional and holistic view to money, investments and debt than many people have.

HapiChapi

my wife and I have been overpaying our mortgage through the one account and now it has been paid off there is a sense of relief.

I have now gone self-employed and feel more comfortable not having to think about the mortgage payments.

However, on the other hand, i do not contribute to a pension but have started contributing to an ISA. I'm 40 and wonder if I can really build up a decent fund in a pension over the next 20-25 years or whether ISA's would be the better option? A have read other threads and seem to favour them more than a pension policy.

We also do not really want to live where we are and would like to upgrade to a better area. But as has already been mentioned above, we are reluctant to get a mortgage again at this moment in time (housing prices/ interest rises/ self-employment) and are therefore stuck in this predicament.

Previously we just had our minds on getting rid of the mortgage (£90K) and were excited to have been rid of it (seen as a large debt) It is now difficult to decide what the best thing is to do.

Sloppy_Saver

cupid_stunt wrote:

We have some savings that we will pay off the mortgage when it becomes unfixed in august. We've saved these over the past 2 and a half years since buying the house but couldn't make big overpayments because the mortgage was fixed and they've been in a high interest account (but still getting less than we're paying on mortgage).

Husband already has a job lined up for when he finishes his PhD in october. I am currently looking and hoping (not unreasonably) I'll have something by next April (gives me 6 months after my PhD finishes to find something). So from then we will massively increase our payments and will be mortgage free by 2010. If it doesn't take me a full 6 months to get a job then it might be a bit earlier.

I'm sorry, I think you and I (and your OH) are just totally diiferent people. You've scrimped and saved while at Uni (during the best, most carefree time you have in your life, outside school) to pull together a substantial sounding savings pot that you intend to throw at your mortgage. Then you say you will spend a further 4 years scrimping some more to throw at your mortgage. And then you'll scrimp some more to get enough cash together to throw into a pension pot to cover the time when you were scrimping for your mortgage payments.

Dear lord in heaven.
When do you intend living your life?

You're young, you both have top qualifications and a great future ahead of you, possibly employed by blue chip employers with great pensions. I doubt that you'll have unemployment worries, certainly not for a long time. You shouldn't have money worries. What do you have to worry about that you will spend the best years of your life scrimping away to protect you from an event that will probably not happen.

Save some (in an offset mortgage), Spend some (live, child. LIVE!) and invest some. If you're worried about the future, get some insurance.

Tim_L

Perhaps a little patronising?

Not having spending money was never a stop to having a good time when I was a student. But I did see lots of people p1ssing their cash up the wall and then complaining because they were in debt. And this was in the days of grants and dole/housing benefit during the holidays. And there's a world of difference between postgraduate life and undergraduate life.

I'm hesitant to come riding to the defence of someone who is evidently perfectly capable of speaking up for herself, but if you read the posts you'll see that there is a roughly 5 year plan with most obvious bases covered and then an aspiration to leave work and start a family rather than staying in employment. Works for me.

Tim_L

HapiChapi wrote:

my wife and I have been overpaying our mortgage through the one account and now it has been paid off there is a sense of relief.

I have now gone self-employed and feel more comfortable not having to think about the mortgage payments.

However, on the other hand, i do not contribute to a pension but have started contributing to an ISA. I'm 40 and wonder if I can really build up a decent fund in a pension over the next 20-25 years or whether ISA's would be the better option? A have read other threads and seem to favour them more than a pension policy.

We also do not really want to live where we are and would like to upgrade to a better area. But as has already been mentioned above, we are reluctant to get a mortgage again at this moment in time (housing prices/ interest rises/ self-employment) and are therefore stuck in this predicament.

Previously we just had our minds on getting rid of the mortgage (£90K) and were excited to have been rid of it (seen as a large debt) It is now difficult to decide what the best thing is to do.

You need to see an FSA (or preferably several) I think. But what I'd suggest is that you work out for yourself what your must-haves are in the major areas, housing, retirement, and whatever else is important to you so you can work the tradeoffs. If you must move because there are problems in the area then you might have to compromise in other areas such as retirement provision.

cupid_s

Sloppy_Saver wrote:

I'm sorry, I think you and I (and your OH) are just totally diiferent people. You've scrimped and saved while at Uni (during the best, most carefree time you have in your life, outside school) to pull together a substantial sounding savings pot that you intend to throw at your mortgage. Then you say you will spend a further 4 years scrimping some more to throw at your mortgage. And then you'll scrimp some more to get enough cash together to throw into a pension pot to cover the time when you were scrimping for your mortgage payments.

Dear lord in heaven.
When do you intend living your life?

You're young, you both have top qualifications and a great future ahead of you, possibly employed by blue chip employers with great pensions. I doubt that you'll have unemployment worries, certainly not for a long time. You shouldn't have money worries. What do you have to worry about that you will spend the best years of your life scrimping away to protect you from an event that will probably not happen.

Save some (in an offset mortgage), Spend some (live, child. LIVE!) and invest some. If you're worried about the future, get some insurance.

I see totally what you're saying. You do need a life. But I don't feel like we scrimp and save and do without. I like things (in terms of spending) how they are now and always say to my OH 'do you wish we had more money?'. He says 'yes so we could pay the mortgage off more quickly - but everything else I want I have'. I feel the same way. We have 2 foreign holidays a year, eat out whenever we want and spend a small fortune on my pets. I don't see much else as important.

If we really scrimped and saved we could pay it off at least a year earlier but we're not for the simple reason we do want a life.

HapiChapi

Tim_L wrote:

You need to see an FSA (or preferably several) I think. But what I'd suggest is that you work out for yourself what your must-haves are in the major areas, housing, retirement, and whatever else is important to you so you can work the tradeoffs. If you must move because there are problems in the area then you might have to compromise in other areas such as retirement provision.

There are so many to choose from. How do you know which is good or bad? some charge a fee and some don't. Is there any rule of thumb to go by when choosing an FSA?

IFA

I'm not banking on getting a good pension, I have a matched 4% with my company but how much of that will I see when I retire? I'd rather pay my mortgage off early then start saving into an ISA and continue the matched 4%. Then I'm not putting all my eggs in one basket. It depends how long you think you'll live after 60 or 65/70 whatever (if at all), if it's 10 years then 100-150k savings should be adequate And a lot of people cah save 50k and above on interest payments on mortgage by paying off early.

It's a tricky one, arguments on both sides

And yes I treat my mortgage like my diet