Mortgage free before 60

bournefree

Hello, I'm divorced and have a new partner of 8 years now, and we're both in our 50s. I'm 55 in a few weeks! Children grown up in their late twenties. I have a mortgage on the property where we live, due to be paid by the time I'm 66 ( my state pension age). However, am trying to overpay so I can have it paid off before I'm 60 (my 'normal pension age' in my job). Current mortgage 65K. Am paying double what is required, (1.5% so actually paying £1200 pm) and in the last year have lopped one year off the mortgage. Almost 40% of my income though, so hard work. Trying also to save the full cash ISA amount each year (4 years to date). Am I doing the right thing?

Martinslovechild

Are you doing the right thing financially?

What is your mortgage rate? It's quite likely that your Cash ISA rate may be less than your mortgage - in which case this cash could work harder for you as a mortgage overpayment, however that's why I ask the question above as you may have plans for this Cash ISA money at some stage.

Bear in mind that most Cash ISAs pay derisory amounts of interest and it's likely that you're losing money in real-terms after taking inflation into account, therefore considering using the money towards your mortgage may provide a better outcome.

bournefree

Hi, mortgage rate is 1% above base, so 1.5%.Cash ISAs at 2%+. Conscious I need funds just in case of redundancy. I think of the ISAs as security, to pay for my high security care home in due course! Tax band 40%.

bournefree

Forgot to mention, I have 31 years continuous service in a final salary pension scheme (50% of best 3 in last 10 years), so hope to make it to 40 years (age 64) at best, or age 60 at worst. Health not brilliant, but hanging in there!

Martinslovechild

I guess it's a choice of priorities. I cleared my mortgage and then started a Stocks & Shares ISA afterwards, I didn't have the two running concurrently, though I can see that presently the Cash ISA rates are slightly better than the mortgage rate - though keep an eye on these rates.

Look at Martin's Money Makeover and see if you're able to squeeze any additional savings to increase the amount you're able to overpay. This isn't a case of giving things up - but shopping elsewhere to buy products at a cheaper price (particularly car/home insurance, also what Martin refers to as the 'Downshift Challenge', i.e. buying a slightly cheaper brand (e.g. if you normally buy items from the 'finest' range, consider the normal range).

You're definitely on the right track - and I can confirm that clearing your mortgage is definitely the right thing to do.

bournefree

How did you clear your mortgage so fast? I'm on a good salary, although starting life again in your 50s is the price you pay. In a perfect world I'd get rid of the mortgage asap, and build up ISAs for my dotage, and having reached a comfortable amount on cash ones build up stocks and shares ISAs - although being older I'm more risk averse.

Martinslovechild

If you'd like to read how I did it, I posted a thread on MoneySavingExpert at the time.

Lots of things really - a combination of stoozing, overpayments and clever budgeting. Good luck, it can be done!

bournefree

Thanks Martinslovechild, your story is inspirational!