Disadvantages to being mortgage free?

Mzywrcj

Are there any disadvantages to becoming mortgage free?

Coming in to some inheritance and considering paying it off early in its entirety. No other debts, higher rate tax earner so savings rates are lower than mortgage interest rate and still worthwhile incurring the early repayment fee versus ongoing interest payments in my calculations.

But what about my credit rating? Borrowing in the future? Any suchlike negative impacts?

TIA

SavingSteve

Personally I'd be thinking about an offset deal, maybe even a lifetime variable rate (Coventry's Flexx comes to mind).

That way you can easily access the cash should you need it.

Thrugelmir

What's negative about being debt free? Most people dream about the moment it will arrive.

lisyloo

Anecdotally some people say it's a negative to getting credit.
An obvious one is an open line of credit especially if it's flexible.
If you might claim benefits it may be advantageous to have no savings.

chelseablue

If I had the money I'd be paying mine off, I can only dream of the day.


But then I do owe £228,000 :rotfl:

Gloomendoom

I've got the money and, unless my circumstances change, I have no intention of paying it off early.

The net income from savings and investments that I would have to use to do so exceeds the cost of the mortgage interest. Plus, I would lose the flexibility and security of a relatively large sum of easy to access funds.

ACG

Its a sign your getting older :-P

I have also read buildings insurance is more, not masively maybe £30-50 a year? I dont know how true it is though.

Kynthia

The only disadvantages I can think of are that you can't use the money for anything else in the future if you no longer qualify for a mortgage. However that is very speculative as it is dependant on both of those things happening.

The other disadvantage is that there might be better financial uses for the funds. For example would the money be better in your existing or a new pension? It's a tax efficient firm of saving and if invested can make more more over time than tge interest you'd save on your mortgage. If you didn't want to tie up the money until you're 55 then you could still invest it in a stocks and shares ISA or with an IFA. You may want to purchase a btl property (I'm not recommending it) or go on a round the world cruise.

NorthernMonkey1

I'm should be coming into a little bit of cash in a years time (about £12k). When I get this as I'm a higher rate tax payer, I'm intending on paying an extra £850 a month into my pension (via company scheme), which results in a £500 a month reduction in pay in my pocket.

Ill then spend the lump sum at £500 a month for 2 years, so swapping the 12k lump for a 20k pension contribution