Can someone please explain to me why people pay off their mortgage early?

2010

Walcott wrote: »

Or have I completely missed the point?

Of course you`ve missed the point like so many people these days.
A mortgage is a DEBT.


The other thing is, if you let the mortgage run the full term, you end up paying 2/3 times the original cost of the house.

System

2010 wrote: »

Of course you`ve missed the point like so many people these days.
A mortgage is a DEBT.


The other thing is, if you let the mortgage run the full term, you end up paying 2/3 times the original cost of the house.

When did I say a mortgage isn't a debt. I thought my OP made it very clear that it is a debt.


I suggest you reread my OP. My point is not that a mortgage costs you nothing other than capital payments.

System

2poor4this wrote: »

Currently interest rates are low, why would you not try to pay/overpay your mortgage off now as the future might see interest rates at a level where you can no longer afford the repayments.

Why would I take out a mortgage if I couldn't afford repayments at regular interest rates?

CLAPTON

2poor4this wrote: »

Currently interest rates are low, why would you not try to pay/overpay your mortgage off now as the future might see interest rates at a level where you can no longer afford the repayments.

a sensible, money concerned person, would only pay off the mortgage if they couldn't get a better return by using the over payment money to better effect (e.g. if savings had a higher interest rate than the mortgage rate)

System

@ Clapton - thanks, I think I've got my head around this!

2poor4this

Walcott wrote: »

Why would I take out a mortgage if I couldn't afford repayments at regular interest rates?

What are regular interest rates?
I'd rather have somewhere to live with meagre savings than a fat bank account and a cardboard box in a doorway

Colin297

Walcott wrote: »

Why would I take out a mortgage if I couldn't afford repayments at regular interest rates?

You do realise a repayment could potentially double if interest rates went up 4 or 5 percent ?

If you mortgage say 200k and pay it back over 30 years you could well have paid a total of 400k PLUS.

I don't think you fully understand just how much money early repayers can save. Which is exactly why most banks prohibit it and most others charge a early repayment fee....

CLAPTON

Colin297 wrote: »

You do realise a repayment could potentially double if interest rates went up 4 or 5 percent ?

If you mortgage say 200k and pay it back over 30 years you could well have paid a total of 400k PLUS.

I don't think you fully understand just how much money early repayers can save. Which is exactly why most banks prohibit it and most others charge a early repayment fee....

most banks don't prohibit over payments except on fix rate deals


and if saving rates were higher than mortgage rates then saving the money would give a better return

System

Colin297 wrote: »

You do realise a repayment could potentially double if interest rates went up 4 or 5 percent ?

If you mortgage say 200k and pay it back over 30 years you could well have paid a total of 400k PLUS.

I don't think you fully understand just how much money early repayers can save. Which is exactly why most banks prohibit it and most others charge a early repayment fee....

According to BBC mortgage calculator:


Monthly repayment on a 200k mortgage @ 5% interest rate over 25 years = £1,182.54


Monthly repayment on double that interest rate:


Monthly repayment on a 200k mortgage @ 10% interest rate over 25 years = £1,836.13


So I am not sure how it doubles according to your post above.


I'm not really interested in the head line figure of how much money a person pays over a lifetime. That is irrelevant as a single number taken in isolation because that isn't indexed to the time value of money.

System

2poor4this wrote: »

What are regular interest rates?
I'd rather have somewhere to live with meagre savings than a fat bank account and a cardboard box in a doorway

That really doesn't make sense. Why would someone with savings live in a cardboard box?


Look, I get this is an emotive issue for some and that is why I deliberately chose to post this in this section where I could hear from people who are saving/investing and their views on this matter.


I am not trying to say people who do this are wrong or right. Hey, if you sleep easier at night by overpaying then that sleep is worth more than a million bucks.


But I do not share your anxiety so I am trying to figure out in my head how this whole thing works.