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

grey_lady

hhhmmm..

"This may have been people's misinterpretation of this thread or my posts but believe me I have never attacked people who wanted to pay off their mortgages early!"

This raises an interesting point, for example, if everyone who read the post the above came from and 10+ people intrepreted it as an attack but you insist that they were mistaken, were they really mistaken or are you unable to admit that you were wrong? no matter what your intentions.

'I agree with you that when our circumstances changed that we "didn't change the plan" but even now with hindsight I don't see how we could. But I am proud that we didn't bury our heads in the sand and pretend nothing was happening. If hubby hadn't have got that job than we would have sold up and got ourselves back on our feet. I didn't expect handouts from anyone, whether a relative or the state. If we had moved in with a relative we would have paid our way.'

Im not sure if this is so relevent to the present or the future, for example - your oldest has left home (Uni) so im assuming if you have other younger children they are now old enough to not need childminding, therefore why is the emphasis still on your other half to be the main bread winner?

Oh dear, now im worried that my post is seeming like an attack on you and its not meant to. If anything you've reminded me how hard it was in the late 80's early 90's for those with a mortgage.

jamesd

beachbeth, pensions have improved considerably in flexibility in recent years. You can still choose to buy an annuity in one person's name that ends immediately if they die but that's not at all necessary.

First thing to consider on pensions is that each person has their own personal tax free allowance so one easy thing to do to get more pension income is for each person to have a pension of their own. Even with no job you get basic rate tax relief on about 3600 a year of after relief contributions.

Key to pension final value is how the money is invested. Personal pensions now offer lots of different fund choices instead of the old days when there may have been exactly one choice.

When it comes time to take the pension income there are choices as well. Annuities providing a regular income can be purchased in a single name to stop when that person dies but are also available with guarantees to pay out for at least five or ten years. They can increase with inflation or not. They can be in two people's name or one and can provide full or 50% income after the first death. If you happen to be unhealthy when you retire you can get higher annuity payments to reflect the shorter life expectancy using an impaired life annuity. And if annuities don't seem best there is the option to use "income drawdown" and take income from investments instead of buying an annuity. If using income drawdown the money is just inherited by the other person and the income continues after the first person dies, just like a dual life annuity. Lots of good choices that can be mixed to produce the best package for the situation.

Middling good investments in the 40s with modest monthly contributions can produce very worthwhile pension values. Say 100 a month after tax relief growing at 5% over inflation from 40 to 65 could produce an extra pension of 300 a month indefinitely in todays money, growing with inflation (assuming 6% income drawdown). No tax on that if it's the only income for the person. With life expectancy around 85-90 now that's 25 years of 300 a month of pension in exchange for 25 years of 100 a month of contributions. Not a bad deal at all.

All of this is completely independent of any employer so whether they go bust or not doesn't matter at all.

beachbeth

grey_lady wrote: »

Im not sure if this is so relevent to the present or the future, for example - your oldest has left home (Uni) so im assuming if you have other younger children they are now old enough to not need childminding, therefore why is the emphasis still on your other half to be the main bread winner?

Because I have a long term illness and am unable to work. I get incapacity benefit and believe me I hate telling anyone that I get this benefit. I was brought up in a family who believed in paying your way and that it was bad to be on benefits (I know this isn't the case but I still feel a bit ashamed to admit that Im on benefits).

I see others going out to work and paying for this, that and the other as well as saving and I admit that Im jealous. I wish I could go out and earn but I can't so I have to make the best of what we have. My hubby luckily earns a nice wage and my eldest daughter works too when she's not at Uni (my other daughter is at college), so Im glad Ive instilled in them that you don't just sit about at home, you have to make your own way. I was worried at one point that they would see me staying home and take this as an example.

GettingThingsDone

Hi all - sorry if I stirred it up a bit along the way, but 3 observations:

1) DD makes the assumption that everybody visiting MFW has already spread their funds across a range of investment types to balance risk and maximise income.

2) DD also assumes that everybody in here is financially educated enough to understand the implications of what they are doing.

3) DD assumes that when people ask questions or offer alternative views, then they are attacking him personally.

Yes, this is the MFW forum, but people have still got valid questions about the whys and wherefores. Ultimately, we are all MFW's - anyone who has a mortgage is supposed to pay it off, so really it's a question about term.

My concern is that there are people who will be attracted to being MFW when it may not be the best use of their funds in their particular circumstances and their expectations of the future.

I think there is great scope for a sticky that explains the best strategies and maybe some kind of checklist to read before you go ahead.

gtd

beachbeth

grey_lady wrote: »

This raises an interesting point, for example, if everyone who read the post the above came from and 10+ people intrepreted it as an attack but you insist that they were mistaken, were they really mistaken or are you unable to admit that you were wrong? no matter what your intentions.

If you look at my very first post in this thread I said the following:

"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."

So, after stating clearly that I think that people who pay off their mortgage quickly are not wrong, if people still then think Im attacking them what can I do?

beachbeth

GettingThingsDone wrote: »

1) DD makes the assumption that everybody visiting MFW has already spread their funds across a range of investment types to balance risk and maximise income.

2) DD also assumes that everybody in here is financially educated enough to understand the implications of what they are doing.

3) DD assumes that when people ask questions or offer alternative views, then they are attacking him personally.

This is what I felt too. I offered alternative views to DD and he didn't like it. Plus, he has stated he runs his own business, he talks about offsetting this and that, about his pension pot and it is obvious he is good with figures and enjoys working with his money, mortgage and investments. Im not attacking this, it is a really good thing to be able to do. I wish he could come and look at my finances and do the same thing!

However, he seems to be forgetting that not everyone is so savvy in the world of money, mortgages and investments. For some it can be difficult to just budget normally from week to week without having extra worry about putting their money into things that they don't necessarily understand.

do_it_today!

At times this process will be a bit sticky because nobody knows everyones FULL situation unless they state it from the start... assumptions will be made at times. Advice will fit some people and not others. A checklist could be nice but may also mislead people who dont fit the general criteria of that checklist (which could be alot).
Although there is a broad type one on this website about paying off cc before saving... At the moment there is no general foundation of financial education for all. So as we all stumble along life and we have to seek the information/strategies/ education ourselves try it - test it - work with it learning as we go along.
This resource is not where you come to find ALL your answers but will serve in part to finding the answers! I read posts here - read books - investment mags and analyse my own financial picture. These forums are tools but ultimately you have to make your final choices.
I think there are many people who come on here with varying circumstances and levels of financial knowledge/savvy. so its all swings and roundabouts really.

Anyway Im just glad its here Im also glad for MFI3 too - Nothing is compulsory its all about choice, offering of support and sharing aslong as we can all stop being side tracked

beachbeth

Dithering_Dad wrote: »

you will see that I observed from previous responses by MFW's to these "Don't pay your mortgage off" threads,.....

Please note, this is not and was never intended to be a "don't pay off your mortgage thread". In the title I said I wanted an explanation as to why it was a good thing. I didn't say it wasn't a good thing, I wanted a pros and cons discussion.

Dithering_Dad wrote:

As you have plastered my "DD" all over this post, discussed me with Beachbeth and had the "please take him away" chat, then is it surprising that I think you're personalising the debate?

These are quotes from you quite early on in this thread:

"Sorry if my posts come across a little harsh, but it really annoys me when someone throws out the inconsidered and incorrect argument that "if you overpay your mortgage then you're a scrimping miser who needs to get a life" or "you're a fool if you invest in a pension because someone will steal it off you".

- You were assuming this was my point of view and I never said and don't think that you are a scrimping miser if overpay your mortgage.

"Are you a Daily Mail reader? :rotfl:"

I think it was actually you who first made your comments personal.

Dithering_Dad wrote:

I also don't think MFW's are quite as financially naive as you seem to believe. I have been on the MFW thread for several months now and have found everyone to be very financially astute.

No one is saying that MFW's are naive. I would personally think that people on this board are more likely to be astute when it comes to money otherwise they wouldn't even be thinking about being a MFW. What I am saying is that with people in general there are a lot of people for whom paying off their mortgage wouldn't be the right thing to do because they are not very good with figures or their finances.

For example, in a previous thread I mentioned my BIL who has lost out with his pension and you asked if he reviewed his pension annually. Well, he didn't because he was one such person who is not savvy with finances and Im afraid he didn't know you could do this.

I came on here originally so that the savvy MFW's here could give me a good discussion and perhaps come up with ideas I hadn't thought about when paying off your mortgage. I would hardly have come on here asking for a discussion as to why it was good to pay off your mortgage if I thought the MFW's were naive and "hopeless with money" !!!

You seem to twist everything I say, take it the wrong way and then assume that I mean x, y & z when I really mean a, b and c.

MUSTBEFUNNY_2

"So, DD can make derogative jokes and attack me but I can't do the same to him?" BeachBeth

This is the truth. DD insults people continuously but his insults just get removed from the board. The problem is that when new people come along they don't know what he's like and find themselves being attacked as if it's never happened before. IT HAPPENS ALL THE TIME. You are not the first. You are just the latest. Don't waste your time arguing with him.

InMyDreams

Dithering_Dad wrote: »

Once again I find that I'm beating a hasty retreat from another "Don't pay your mortgage off" thread. :rotfl:

Do I argue the MFW corner too hard because I seem to be attracting a throng of anti-MFWers who all come out of the woodwork when I express my my pro-MFW opinion?

DD, can I respectfully suggest that you do not take arguments from one thread onto your MFiT thread if you want to keep it 'clean'. Last time you did that a whole chunk needed to be deleted. You are making it very hard for others to show some restraint by doing this. Can I make a plea now for no one to respond negatively on the MFiT thread.

I know we seem to have our differences and that they offend you, which is why I have refrained from posting on this thread (although it is a subject close to my heart). I do not believe that the people you refer to as trolls are so, but even if they are, why provoke them into a response on the very valuable MFiT thread? I understand you feel personally attacked (again) but I suspect so do the people you refer to as trolls. We are all human behind the screen. And when you take your own poetic licence to paraphrasing quotes, it can be seen as inflammatory.

Personally, I think rehashing the 'should I pay off my mortgage question?' is very valuable and it's a shame people are scared off from joining in (or maybe that's just me). It's easy to become a bit obsessed. I know I did and have now learned to lighten up. My main aim is to *maintain* my standard of living and they extent to which I was obsessively squirreling away at my mortgage offset pot *was* out of balance. I am very money saving, and write down every penny we spend. But things were going too far. One of my reasons for saving hard into the offset pot was to be able to help fund my children's education. And then I found myself telling my husband that we couldn't afford piano lessons for my daughter now. Another was so that we didn't have to work such long hours in the future, but I found myself working extra hours now while our children are still small.

I don't want to 'live for now' only to struggle in the future. But equally I don't want to deny ourselves so much now only to have the prosperous future as I suspect by then I will be so set in my ways I won't be able to spend the money without guilt, still thinking of 'the future' as there will always be one, even if not for us. Balance is the key. Finding that balance is very difficult, especially with all the unknowns the future holds. I just wish that every debate on the subject didn't end up getting so unpleasant with you feeling attacked and then crying about it in other places around the site, and then wondering why the 'trolls' follow you. Please don't take so much offence when others disagree with you. It doesn't mean they/we are anti-MFW.