Is it so wrong to pay off my mortgage early?

Red29

I would really appreciate some insight from some impartial observers

My offset mortgage balance is £28000.

Monthly payment - £400

Mortgage interest rate is 1.29% (tracker)

7 years left on mortgage

Savings approx £40k – about £25k offset , the rest split between bank accounts / fixed term savers all paying 3 – 5%.

I am a basic rate tax payer, aged 47.

I keep looking at my mortgage and thinking I could clear that with a couple of moves of my mouse!!

I bought my house in 1998 for £50k and then like a fool borrowed £35k on it - so basically the balance now outstanding is the extra that I borrowed and I hate it!! It’s a constant reminder of my foolish decision!!

However, I am no longer a money spending fool!!

Logically, I know I am very lucky with this mortgage interest rate, and should invest my money, and not pay off the mortgage, as the rate of returns are higher and not keep the offset balance so high.

Emotionally, I just want rid of it However, I appreciate this choice will make me a money fool as well!

I am thinking shall I just pay it off and then re-build my savings – I will be able to save £800 - £1000 pm once there is no mortgage payment going out.

I just wondered if an impartial outsider might see another option or factors I haven’t considered?

Many thanks

Eco_Miser

Logically, as you said, you should keep the mortgage and profit from the higher interest you are receiving.

Emotionally, I have never regretted paying my mortgage off early.

talexuser

Ditto. Logically look at the interest rates do the thing the accountants say is best.
Emotionally paying off my mortgage (did it in 7 years on the 3rd house) is the best thing I ever did. Since then disposable income could go into PEPs and ISAs, filled most years (now for 30 years) and the last two houses were bought for cash. Not logical but very satisfying.

atush

Logically, you should be putting money into a pension, over paying off a 1.29% mtg.

So stop overpaying, and up your pension. Do not rob all your cash to pay off a pension at 1.29%, if that money is making a higher interest.

Pincher

It's an offset mortgage.


All you have to do is keep some money in the offset account, and you have "paid off" that much. Take the money out when you need it, and it's a dirt cheap overdraft.


You will not get a mortgage that cheap without paying a fresh arrangement fee.


Leave it alone.


Get 5% on some Regular Savers instead.

kidmugsy

Tell us about your pension position.

Red29

Thank you everyone for your advice and comments.

I agree with all points!! It's head versus emotions.

Atush I hadn't thought of it in terms of robbing my money to pay a mortgage.

Kidmugsy - I don't have a pension, I know before anyone says anything, logically it doesn't make sense to pay off a low interest mortgage but have no pension and all the tax relief that comes with it.

I also came across this post from Monevator -

http://monevator.com/not-paying-off-my-mortgage/

I am going to think it through for a few days but I think I might go for a compromise of paying £3-5K now and then take stock at the end of the year - which still doesn't make logical financial sense but it will appease my self disgust everytime I look at my mortgage balance, as it is a reminder of past stupid spendthrift self!!

Thanks again everyone

Playing_with_Fire_2

I hereby forgive your former self for foolish spendthrift behaviour. Your foolish behaviour mortgage of £35k has been replaced with a super savvy pension-investing £35k mortgage, at the same excellent tracker rate of 1.29%.

Now go and set up a pension.

Please direct all negative thoughts to my office where they will be hit with a frying pan.

atush

Dont pay anything off your mtg, it is offset- just leave it in the offset acct if you must (but you'd be better off putting most of it elsewhere getting more interest).

Set up a pension. NOW. Save into it.

bigfreddiel

Many years ago there was MIRAS. When that was removed I paid my mortgage off.

Cheers fj

atush

But you have a pension too