Is it ok to never pay off my mortgage?

lizzo

6 Years ago I had to start a mortgage on my own again. £40000, and my house is worth about £185000. I don’t have any children to leave my house to, so my financial advisor suggested that I never pay off the capital, but keep re newing my mortgage every 2 or 3 years, and pay the Interest Only. That way he said I would have more money in my pocket now. So I don’t have any saving scheme in place to eventually pay off my mortgage. There is something about this, which makes me feel a bit insecure.
I am 56, have a pension, and a part time job. I would be interested to hear what others think?

dwsjarcmcd

lizzo
Sorry but I feel the 'advisers' logic is ridiculous!! Why would you want to pay interest indefinately, particularly when you choose to retire, you income will probably drop, but your loans won't, so it is storing up an issue for when you are least able to do much about.
The cynic in me says keep renewing your mortgage = money for the adviser every 2 or 3 years!

Rick62

Yes, if you can afford it pay it off, ideally in 10 years, so that you can retire. Otherwise (unless your pension is good enough) you'll be having to work till you die.

It would add about £250 to your monthly payments, perhaps you could increase your hours, or get a second job? Why not look for a second job for 10 to 15 hours a week doing something you enjoy and use the money you get paid to pay off the mortgage as quickly as possible?

silvercar

work out the figures, the interest at 5% would take 20 years to equate to the capital outstanding.

I can see his point, that you may as well live for the present as starve for the future. But if you can repay the capital without a great impact on your lifestyle it is worth considering to give your self a rent free home in your later years.

lizzo

Thanks for your comments, I think I get some more advise from another financial advisor!

KittyBoo_2

I have £1500 of premium bonds and not sure if I should use these towards reducing my mortgage.
My mortgage is around £71,000 and I have 16.5 years left to pay. I pay £556.00 per month (I took out a secure loan which is included in this)
I work for local government on short term contracts (usually a year) and which pays around £800 per month for part time work.
I have recently got another part time job which will pay me about £400 after tax. I don't know whether to use the extra to pay off the mortgage or to save it.

dwsjarcmcd

lizzo wrote:

Thanks for your comments, I think I get some more advise from another financial advisor!

Personally, I think that would make a lot of sence!

EdInvestor

lizzo wrote:

6 Years ago I had to start a mortgage on my own again. £40000, and my house is worth about £185000. I don’t have any children to leave my house to, so my financial advisor suggested that I never pay off the capital

Perhaps he was thinking that eventually you could either trade down to a cheaper property (worth 145k), thus releasing capital to repay the mortgage, or convert the i/o loan into an "equity release" lifetime mortgage, which you don't have to pay back at all.

Since you have no children, this would be a sensible way to boost your retirement income,though ideally not for quite a few years yet, as the older you are the better deal you get.

If either or both of these routes are a future possibility, there seems little point in struggling to pay off the loan and having a miserable life at present when it's not necessary.

lizzo

Thanks Edinvestor, I believe that was his original thinking, and the equity release suggestion was something he mentioned might be an option when the time is right.

jamesd

lizzo, its hard to say what is best without knowing more about your pension planning. The reason for this is the effect of benefits. If your pension will be low it may be better to keep the same house or possibly use investment bonds as a tax wrapper to keep you eligible for benefits in retirement. If the pension is medium or high that's not a factor and your best option is likely to be normal investing for retirement.

Did you get a state pension forecast to find out what state pensions you would get? Do you have any employer pensions? Any existing savings or investments (that may rule out you qualifying for benefits if they aren't taken care of)

If it seems sensible to maximise the pension (benefits not a consideration) then it may be best to change property now. Then you can invest the mortgage payments and the reduction in bills and improve your position in retirement. But first it's necessary to work out the likely pension income.