Explain to me Why its Good to Pay off Your Mortgage quickly!

beachbeth

I understand that if you pay your mortgage off sooner rather than later you will pay a heck of a lot less interest so Im not being thick here.

The way my hubby and I look at it is this:

We are 46 and 42 and have never had a pension. My husband never believed in them and we couldn't afford to take one out at the beginning of our marriage what with paying a mortgage and having kids etc. I used to worry myself silly that we didn't have a pension. Then there was all the news about pensions collapsing and, of course, we all know that there are many people out there who put money into a pension for years and years only to end up with nothing. It turns out that my hubby was right all along.

Now, we both have a similar attitude to mortgages. Why work yourself silly, possibly doing without things in order to pay your mortgage off early? If you cut your mortgage say from 20 years down to 10 years then its all well and good once the 10 years is up and you now have no mortgage to pay but what if you die before the 10 years is up (sorry to be pessimistic!). You could say it was all for nothing. Why not carry on paying your mortgage over the 20 years, enjoying some of your money now because the repayments aren't so high and then it won't matter what happens because you are making the most of life today.

Now Im not here saying that people who pay it off quickly are wrong Im just asking for a discussion as to whether it really is the right thing to do.

noh

If you believe you will die young then spending everything you receive is logical. But what happens if you don't? You could spend 30 years living in poverty.
Those that pay of their mortgage early to maximise their savings either via pensions or other means are insuring themselves against poverty after retirement and may even be in a position to give up or reduce the amount of work they do prior to state retirement age. Paying the mortgage early and saving gives you more choices in life.
Saying your husband was right all along not to save in a pension is just plain wrong in my opinion unless you have any alternative savings/investments.

Nigel

jizadine

I guess it all depends on your attitude to the quality of life you want to have when you retire (and what you think will be your life expectancy). I am assuming that you do work. The fact that you haven't got any pensions set up, I would be expecting that you will be working right up to your official retirement date. So, what money you have now - I would say that you should be putting away for when you retire (be that saving money your paying in interest on your mortgage over its term or even saving into an appropriate investment vehicle) because the state certainly aint gonna look after you...

It is better to not put all your "investment eggs" in one basket so relying solely upon a pension (state or contributed) is probably not the greatest thing to do. In your original post, you do not state that you have an alternative to provide income in your retirement so again I am assuming your nest egg is your property(s)?

Slightly offbeat - I know, but I am trying to relate to your current poisition....

I am in a fortunate position to be overpaying my mortgage by £100 a month and it is very nice to those thousand's each year wiped off the outstanding balance. I am hoping to retire a lot earlier than 65.... Or die young and rich :rolleyes:.

Jz

robp

I guess for most people it's a question of balancing money coming in vs money going out, cutting your cloth, etc.

We started paying off our mortgage early when we saw how much interest could be saved over the term (and indeed cut the term down by many years). We do that be working hard and being careful with our money.

I know people who live off the state pension only, and some who have other pensions or savings. There is a big difference in their standard of living, and I know which I would like when I retire. Therefore I have a pension and other savings.

Some friends seem to live from credit card to credit card (with a few loans thrown in). They made a choice to borrow that money but now spend everything they have paying it back.

It feels great to be "getting back at the banks" by paying off our debts early, but we always make sure that it is balanced by having a life as well !

davetrousers

In my experience people who say things like "Spend it now you might get hit by a bus tomorrow" are the people who are not very good with money and have high credit card bills and loans. Which in my opinion isn't a very good way to plan your life (by plotting your death!)

I am only 1 year into my 25 year mortgage so still have a long way to go but it is my intention to overpay my mortgage in the future, that way my house will be all mine that much sooner and I won't have the mortgage payment coming out of my account each month!

Jillinoz

Apart from the obvious financial benefits, there are very definite quality of life advantages, too, in my opinion.

I was fortunate enough to pay off the mortgage on my dream home at the age of 37 (I don't say 'lucky' as luck had very little to do with it, it was more a case of a lot of damned hard work )

Since, I was no longer chained to the prospect of paying out a third of my monthly income on servicing a mortgage (and I live on my own so there was noone else to pick up any shortfall), I felt able to downshift from the high-pay high-stress job and follow my heart's desire workwise.

I can now pursue the low-pay high-satisfaction job I enjoy secure in the knowledge that noone can ever take my home away from me.

Jillinoz

Desperate_Housewife_2-2

Hi,

this question pops up from time to time and is still a hot debating topic.

I think the bottom line is that it has to be what suits you and your situation and your thoughts on your own financial situation.

I personally want to pay off mine because it means I can then live rent free for the rest of my life and won't have to pay any more interest. I am 42 so that leaves me with around 20 years of working life to save up what I would have paid in rent/mortgage.

It has to be a personal decision.

sallyb17

I'm not able to pay mine off completely in the next few years, but I am making overpayments and hope to make a large dent in the capital. Why?

Personally, for me, I have a flexible mortgage, and can take payment holidays, thus it doubles as a tax-free 'emergency fund' that I can use without touching my ISA allowance, which I hope to use and keep towards long-term savings/pension.

A reduced capital will, to some extent, help ride out any future interest rate rises and, absolutely worst case scenario, decrease the chance of falling into negative equity in the event of a crash.

It may be possible to get better returns elsewhere, possibly with more risk, but after using up your ISA allowance it is probably one of the safest places for your money.

Kaz2904

The problem with this is that you are assuming that you will be able to live off the state pension.
You state that it is good that you never started a pension and you can't see why anyone wants to pay their mortgage off early.
The problem for me is that at 29 I have to work full time. So does DH. We both know that we will be expected to carry on working until we are 70. I have a pension but he does not. I am well aware that my pension will not pay enough for us to survive once we retire so we need some other investments.
We also have 2 children who may well want to go to university when they are older. This will be costly. I am aware that they start to cost more as they get to teenage years too.
Due to the nature of my job I was able to switch to working full time nights when DS was 6 months. This meant that we could stop paying for childcare so we were then able to afford a mortgage high enough to buy a house. This time was hard and we decided that we had to get some form of relief from this.
We started to overpay the mortgage to enable us to afford to have a future without struggling. We started to do it at a time when the children were small so we don't have much of a social life with needing babysitters and with me working nights.

It is all about the kind of person you are and whether you expect that the economy of this country can support a generation of people with no financial planning for their later years.
It's kind of like having insurance against growing old. Like having home insurance, it's there for when you are vulnerable and need it.

beachbeth

Kaz2904 wrote: »

The problem with this is that you are assuming that you will be able to live off the state pension.
.

No Im not!!! Im not even taking this into account. I have a good inheritance coming my way, although I know this isn't guaranteed because relatives can fall out with you/change their mind. We have £140,000 equity in our house and could move to a much smaller house in a cheaper area if need be to release some of this and have no mortgage when we retire. So even if I were to receive no inheritance we still have a plan to cover our retirement. I just don't know whether we should work hard to pay off our mortgage now or not. We owe £44,000.

Bestthingsinlifearefree

beachbeth wrote: »

No Im not!!! Im not even taking this into account. I have a good inheritance coming my way, although I know this isn't guaranteed because relatives can fall out with you/change their mind. We have £140,000 equity in our house and could move to a much smaller house in a cheaper area if need be to release some of this and have no mortgage when we retire. So even if I were to receive no inheritance we still have a plan to cover our retirement. I just don't know whether we should work hard to pay off our mortgage now or not. We owe £44,000.

I guess it's enjoy today but plan for tomorrow. Depending on your income £44,000 is a relatively low mortgage and if you could pay it off with out "suffering" to much I would go for it.

If your main strategy is hoping you both die before you get old and thus not needing any savings. I guess that is one type of plan Have you started smoking 80 ciggies a day and eating a high choleseteral diet to ensure a greater chance of success?

Some people want to spend all their money and live for today others want financial security.

If you spend all your money today, don't complain if you have no money tomorrow.

Best,