Why pay off mortgage?

kidmugsy

A friend of mine used to pay 2.5% p.a. on his tracker mortgage while getting 3.5% p.a. on his tracker ISA with the same building society. He liked to mention it.

Broken_Biscuits

if you are not on a fixed income, overpayments that reduce monthly payments instead of reducing term could make the difference of keeping your house or at least keeping the life style you are used to when times are hard.

invest some but do your research. If you put 10k into one fund/share and the bottom falls out leaving you with 6k, you will wish you took an approach with less risk.

i pay off a little each year so that when i come out of my fix i will be on best terms with 40% owned. If rates stay the same and i have 40%+ equity... Well im not sure i would be overpaying at all. Will let you know when i get there!

Thrugelmir

NickHStamford wrote: »

I guess it does come down to appetite for risk but interested in opinions. What would you do with the £10k?

Don't forget the first rule of investment only stake what you can afford to lose.

Second rule of investment if it looks to good to be true it most likely is. So high yielding shares in particular are doing so for a reason.

If GSK offered good growth potential do you think the market wouldn't react to the current yield level?

jimjames

NickHStamford wrote: »

What I also found is that with no mortgage it was too easy for me to overspend on "luxuries" (ie stuff I don't really need) and so for me, it helps to have some mortgage debt or a d/d into investments each month, then I just live to the new means, and in the long run I am either a) paying down mortgage gradually or b) investing in funds.

Personally I prefer to have the investments and the debt if it is being paid off and is manageable. If the worst happens and you lose your income the investment is still there to pay in once your cash emergency fund is used.

To me it feels more secure having (say) £50k invested and £50k mortgage as I can access the funds quickly should I need to but with no mortgage and no investment I would need to take out more debt if I needed access to cash.

Being debt free will be nice in 10 years but in the meantime I'm making the most of the investments in the tax free ISA wrapper. It also means I can use my ISA more fully so in 10 years I could have £150,000 invested. You can't get that into an ISA more quickly once your mortgage is paid off, you still can only put in the max each year.

Ultimately it depends if you are happier knowing you have no mortgage or happier with investments or cash savings. Having had a mortgage for 20+ years it's something always there so I don't notice it. Being able to see my investments growing is far more rewarding for me anyway.

Gadfium

jimjames wrote: »

Personally I prefer to have the investments and the debt if it is being paid off and is manageable. If the worst happens and you lose your income the investment is still there to pay in once your cash emergency fund is used.

To me it feels more secure having (say) £50k invested and £50k mortgage as I can access the funds quickly should I need to but with no mortgage and no investment I would need to take out more debt if I needed access to cash.

Being debt free will be nice in 10 years but in the meantime I'm making the most of the investments in the tax free ISA wrapper.

Ultimately it depends if you are happier knowing you have no mortgage or happier with investments or cash savings. Having had a mortgage for 20+ years it's something always there so I don't notice it. Being able to see my investments growing is far more rewarding for me anyway.

This ^^
I was overpaying on my mortgage until I got it down to a fairly low level. I've now swapped over to putting the majority of the overpayments into pension AVCs and my investment. The majority of my mortgage is on a lifetime tracker, tracking at 0.5% above BoE base rates. It can sit there for as long as it likes.

Thrugelmir

Gadfium wrote: »

It can sit there for as long as it likes.

Then ask yourself why it is necessary for rates to be kept so low for so long. :think:

ToriP

Interesting thought that. Almost akin to why pay off student loans early.

Gadfium

Thrugelmir wrote: »

Then ask yourself why it is necessary for rates to be kept so low for so long. :think:

No point in asking me that. I'm a tiny little fish in a very big sea, just trying to make it all work for me.

Thrugelmir

Gadfium wrote: »

No point in asking me that. I'm a tiny little fish in a very big sea, just trying to make it all work for me.

Like buffalo roam in herds, fish swim in shoals. Many market bubbles originate from herd behaviour. As thoughts become irrational and are driven by greed above anything else. Just an observation.

Gadfium

Thrugelmir wrote: »

Like buffalo roam in herds, fish swim in shoals. Many market bubbles originate from herd behaviour. As thoughts become irrational and are driven by greed above anything else. Just an observation.

...er...
When the seagulls follow the trawler, it is because they think sardines will be thrown into the sea.
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