Better to be mortgage-free or have "good" debt when young?

badmemory

latecomer wrote: »

So you bought your first house for ~2.7 times your annual salary. Hard times indeed.....

It was difficult when the rate went up to over 15%. Also you had to do your house insurance through the mortgage company. I was paying over 4 times as much insurance years ago than I am paying now.

Personally I would get the mortgage paid off. There is nothing quite like the "come hell or high water I've got a roof over my head" feeling.

jdw2000

Eco_Miser wrote: »

Accounts designated as 'saving' are fairly low to total rubbish, but I don't call 20 times BOE rate peanuts.

That said, I wouldn't take on a new mortgage in the OP's situation.

5% is only available for £2,500. Or £5,000 if you are a couple. Anything over and above that is 3% max, and a whole lot of messing about.

Even on a sum of £100K, you're only looking at about £2K per year in "high interest accounts".

That barely, if at all, cancels out inflation. That is what I call peanuts.

Watty1

jdw2000 wrote: »

5% is only available for £2,500. Or £5,000 if you are a couple. Anything over and above that is 3% max, and a whole lot of messing about.

Even on a sum of £100K, you're only looking at about £2K per year in "high interest accounts".

That barely, if at all, cancels out inflation. That is what I call peanuts.

Would agree with this. Which is why we decided to pay off our mortgages. So that whatever was left over now can be saved and invested but no more are we concerned about paying the mortgage each month. Whatever happens to interest rates we are settled and paid. If one of us needs to stop working we could survive. If I could have matched my mortgage payments in savings interest then yes, I would have done so - but - I could not see a way to generate that much interest.
100K in an account that earns you 2k or pay around £429 a month to keep that 100k mortgage ???
(Yes I know that is a very simplistic calculation and I've not taken all factors into account but once the mortgage is cleared the payments of £429 can be saved, and yes, I still haven't taken all factors into account but it is one easy way of looking at it)

jimjames

jdw2000 wrote: »

5% is only available for £2,500. Or £5,000 if you are a couple. Anything over and above that is 3% max, and a whole lot of messing about.

If you want to believe that then fine. I can assure you that 5% has been available on a lot more than £2500 or £5000 as a couple.

Eco_Miser

jdw2000 wrote: »

5% is only available for £2,500. Or £5,000 if you are a couple. Anything over and above that is 3% max, and a whole lot of messing about.

You're not paying attention. Nationwide starts with £3k, then there's the HSBC triplets, and TSB hasn't dropped yet.
But yes, it's only peanuts if you've £100k looking for a home.

Eco_Miser

californiagirl wrote: »

Thanks, Eco Miser. So you'd recommend we try to invest our income instead?

I know there are people on these boards who are big on stoozing - borrowing money to invest at higher rates. I'm not one of them. I'll quite happily invest my surplus income however, and that will be bigger if I'm not paying a mortgage.

californiagirl wrote: »

What about if we know we want to move house at some point - better to do it now whilst interest rates are rock bottom or not? Thanks.

No idea. Next time I move it will be into a care home.

You've just finished a home and presumably have got it as you want it - but now are thinking of leaving all that and getting a new one because you think interest rates are low (which they are) and will increase in future (which they might). That's letting the finance tail wag the domestic dog.

You may not need to move, and if you do, you may have more saved than you currently expect, so not need a big (or any) mortgage.


But it's your decision, not mine, not anyone else on here's; and it's up to you to weigh up the pro's and con's.

darkidoe

What about forgoing the mortgage all together and renting, investing the whole sum of your deposit?? No worries about paying costs of buying or selling, renovation, costs of maintainence, cost of the mortgage?? I am curious how many people take this radical view? Not many I reckon.

IMO, a mortgage in the modern world is excellent as a savings tool to force people to save, otherwise disposable income just disappears! Of course in the right environment, it can be good business as well.

teddysmum

bigfreddiel wrote: »

I bought my first tiny house in the 70's two up one down terrace, for £7,000.. I was only paid £50/week as a graduate engineer.

The mortgage took most of my salary, along with council tax, car tax, car loan etc. Result no money left at the end of each month.

It was harder then than now. fj

What some don't realise is that this was a high salary, in times when having a degree made you well paid.


In 1969, I worked as an unqualified teacher (before going to college) for £12 a week and relatives who worked in factories,on building sites etc thought it was a huge wage.


Houses could be bought for a few thousand pounds, but people who bought then, haven't really gained, as moving house will not necessarily release much money ( bungalows being popular so more expensive), if they stay in the house it's their descendants who gain when they die, if they don't go into care which means the care home owners will gain from their huge charges, as the house will be needed to fund them.


It's all relative.

bigfreddiel

It want a high salary, in 1977 I moved from aero engineering to teaching and doubled my salary!

Cheers fj

mgarl10024

AnotherJoe wrote: »

Every £1,000 you pay off your mortage saves you perhaps £3 a year

How are you arriving at that figure? That would imply that their mortgage rate was 0.3%?