Why do you people bother?

Tantalus86

I've been pondering this for a little while now - why do people want to pay off their mortgage asap?





Obviously this is a very open question, and I'm just interesting in gathering people's opinions. First of all, yes of course there are massive benefits to being debt free – who wouldn’t want to get rid of it all. It would be lovely to not have to hand over a large chunk of your income every month to the bank and spend it on far more enjoyable things, all whilst enjoying having the peace of mind that knowing no matter what happens you know you’ll have somewhere to live for the rest of your lives.





But from a purely financial point of view though, why bother? With mortgage interest rates so low nowadays, you’d gain more interest from putting any extra cash in a high interest account then you’d save by overpaying the mortgage. Obviously this depends on everyone’s circumstances, but if your LTV is below 70-80% then available mortgage rates will be low. Again, people’s circumstances and available mortgage products differ so for some it makes financial sense but I’d imagine for a lot of people there’s money to be made. I suppose considerations that mortgages are long term products whereas the current financial situation is short term might play a part?





So what are people’s motivation? Is being debt free a bit sooner and having that peace of mind more important than gaining financially?

MoneySavingExpert Insert

Great discussion Tantalus86! Anyone joining in might also like to see these..

Mortgage Free Wannabe board

Should I Overpay my Mortgage?

Mortgage Overpayment Calculator

nearlyrich

There is no better feeling than retiring at 55 with no more housing costs for life. We paid it off long before the very low interest rates came about and I have since spent the money on beefing up my savings and pension contributions to allow me to leave work 12 years before my pension age..

RuleTheWorld

Agree to an extent. With the mortgage due to be paid off well in advance of the current minimum retirement age I wonder what the advantage is of pulling it further forward.

I've never made an overpayment but do cut the period at every remortgage point

Stevie_Palimo

Being mortgage free is a weight off of anyone's shoulders and then you live to enjoy life that much more when you have this burden removed.

Tropically

There are two main reasons why I want to be mortgage free.

1. I can save a lot of money on interest if I try to pay my mortgage off quicker.

If I overpay my mortgage by £500/month, I would save £25,114 in interest payments. The extra money can be contributed to the mortgage if I make only minor lifestyle changes (three pints instead of four at the pub). The more I overpay, the more I save.

2. Interests rates are currently low but 25 years of mortgage is a LONG time and they will probably go up at some point in that time.

I hope they will not be low for so long because it doesn't do well for my savings. Say I overpay as per reason 1, and then interest rates jump 5% in 15 years time. I will be mortgage free so my income will be saved at a high interest rate and I will have no debt at a high interest rate. In this way, I have 'future-proofed' my future finances. I will be able to make gains resulting from increased interest rates in the future and will not have high interest rate debts.

lippy1923

Also most high interest current/savings accounts only allow a certain amount (some 5% ones only allow £2.5k) so once you have 9 or 10 high interest accounts on the go, it gets a bit annoying.
Unless you want to invest and risk possible loss its very hard to find decent savings accounts that can hold a lot of money.

chelseablue

We only moved into our house in Feb this year so only done about 3 overpayments so far


Currently owe £227,000 and still have 33 years to go


Our reasons for overpaying are:


*I don't think this is my 'Im going to live here for 20 years house" so the more we overpay the more equity we will have to put down on a next house


*Im 33 now so don't want to still be paying a mortgage when Im 66


*Current rate is 1.49%, doubt this will be the case for 30 years so want to get the balance down before rates increase


*Sending an extra £500 a month means saving £30,000 of interest

Thrugelmir

Tantalus86 wrote: »

But from a purely financial point of view though, why bother? With mortgage interest rates so low nowadays, you’d gain more interest from putting any extra cash in a high interest account then you’d save by overpaying the mortgage.

Far too easy to be tempted to spend the money. By overpaying the mortgage it's committed. The money's gone. Majority of people lack financial discipline. That's where the problem lies.

coopso24

I make overpayments so the wife can't spend it,

Believe me, if I had a large savings account she would be planning 3 holidays a year and a new car every 6 months !

This way, once HSBC has the money she cant waste it :rotfl:

EssexHebridean

I'm 44, the OH is 42. Last week paid the final lump off our mortgage after 8 years of OP'ing. The original term was 25 years, we paid it off in 13 years. OH worked out that we saved approximately £35,000 in interest by doing this. Our mortgage was a small one - far smaller than most people would take out these days. If we could save this much, just think how much you could save on a larger sum.

Does that answer your question?

MrsElliot

I only started overpaying as I was heavily influenced by this site We are in our first year of paying a mortgage and I overpay a little here and there to save money in the long term and get a better rate when we come to remortage. Using the overpayment calculator just putting in an extra £25 a month will shave 2 years off our 25 year mortgage. At the moment I have a 0% credit card which will be paid off before the 0% deal ends and then any extra money I have will be half saved and put half away at the mortgage. Interest rates are unlikely to stay low forever and my savings are enough to get by for a few months if everything went wrong (also my saving rate is 0.8%! I am looking into getting a better deal!), I overpay for peace of mind and its a great feeling when you reach certain milestones.