Is it so wrong to pay off my mortgage early?

jimjames

zolablue25 wrote: »

I am in a similar position as the OP. I have an offset at 1.25% and could easily pay it off if I wished. I have decided, instead, to use these funds in 3-5% current accounts and pocket the difference. In my own head I have paid off the mortgage already or, at least, could do it in an afternoon if I so wished so its a win-win for me.

Same here except I've invested rather than pay off mortgage. Now could pay it off 3x over but I think I can do far better with investments over the next 10 years.

SpeedSouth

We OP'd ours for a couple of years, but I regret that massively. That was before I was really looking into pensions and investments.

Now it all goes into S&S isas, pensions and small amounts into p2p.
I could pay mortgage free in 3 years I'd guess but we still have 16 years left on our term..

TartanSaver

You seem to think the capital repayments (£400) are preventing you from saving. Making them all at once will not help. What you actually need to consider is the interest: £28k at 1.29% so the debt is costing you about £360/yr. Put it into savings and even if you only average 3%, you'll be £480/yr better off. Why cost yourself this money? Plus you lose future flexibility.

I have about £20k in student loans and slightly more than that in savings. I could pay it off for "emotional" reasons but it would cost me about £500/yr and leave me with nothing in the bank for emergencies.

DiggerUK

Clear your mortgage. The economy can then go to hell in a handcart, and the roof over your head will be your safe haven. Protect that asset, and you are bombproofed.

That will leave you the current mortgage repayments to save, spend, or invest as you wish..._

atush

If they have the money in the bank to pay off th mtg, they are also protected as they could pay it off the next day if required.

You are physical asset crazy- thought it was only gold but now a property bug too?

You need to get back to the math. 3-5% interest beats 1.29%

fifeken

I know this is the MSE site, but the feelgood factor of not having a mortgage anymore is worth much more than a few percent interest on the few grand you're talking about here.

atush

The feelgood factor can go away, if you overpay the mtg and neglect pensions though.

The feel bad factor of not having enough income in retirement is huge.

enthusiasticsaver

You can pay off the mortgage at any time with your savings should interest rates rise but the maths says you can gain more in interest by leaving it in 5% regular savings accounts and a pension is more tax efficient than paying off your mortgage. Your more urgent priority is lack of a pension which I would look into straight away.


I would say that we got rid of our mortage asap but then the rate was higher than yours. My gut feeling would be to make a lump sum payment into a pension/investment instead and start up a monthly payment (if your company does one, that should be the first port of call) and leave at least £28k in 3, 5 or 6% savings so that you are in a position to pay it off at any time.

Red29

Hi all, sorry I've not had a chance to come and respond to the latter replies.

Thanks again everyone for their feedback and advice.

I'm still not fully decided, I keep wavering, but in the interim have moved some money over to 2 x Tesco accounts and 2 x Nationwide accounts to earn me some money!!

I'm a director of a limited company, so with the recent dividend taxation changes, it looks like a diverting money into a pension makes sense to avoid higher rate taxation. My only concern with a pension is they have had such a bad rep, what if the scheme goes bust or grows poorly?

I've realised another thing that worries me is another recession, I can't see how we will get to 2020 without either a full blown recession or a big mid cycle wobble. We might have GDP growth but everything is based on such shaky fundamentals.

A run on a bank also concerns me, I think a lot of things are still hidden, and is there any money left for another bank bail out? Plus re the £75k protection scheme - what if the government runs out of money?

My gut feeling is that I am still going to end up paying some of my mortgage off early, but not as much but with more into pension and S & S Isa, so I can get a higher return than the banks average 3% or so.

bigfreddiel

bigadaj wrote: »

Stocks and shares isas in the 1980s, you were well ahead of your time Freddie!

Not really my dad held equities in the 1950's, must have run in the family

fj