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

beachbeth

Thanks cupid_s. I certainly hope no one would try to persuade you not to pay your mortgage off over a longer period!

I think my hubby and I have come to the same conclusion as you after years of having to pay the smallest amount spread over a lot of years and not having much choice about it.

We wouldn't want to be short of money or go without to pay off our mortgage but we have already put in place an overpayment of £100 per month, so Im quite pleased that we are doing this. I haven't worked it out but its nice to think of the interest you are not going to pay by doing this. We want to be able to have a holiday each year and a bit of spending money too and if we can do this as well as overpaying then its great.

GettingThingsDone

Hi Cupid_S!

Good on ya - what's your view on savings and other investments? I think I've seen some of your other posts about paying off while doing your Phd.

The MSE way that I see is that basically the 'game' is to pay your loan back to your schedule, not the one that you were sold at.

gtd

frosty

Hi,we plan to be mortgage free by the end of this year,we feel you have to strike a balance with life,you never know whats round the corner,we might live to the ripe old age of 90 or we might drop dead with a heart attack tomorrow.We never think we are going to die young and I agree that you shouldnt cut back so much that everyone is miserable,life is for living and enjoying.There are such a lot of things we can do that are free or cost very little money.
1) we still eat out but instead we use the vouchers from the clubcard deals.

2) If we go out for the day we are lucky to have fantastic walks and beaches,and we enjoy the National Trust membership (Quidco £12.99).

3)we dont buy ready meals and have reduced our food budget from £500+ a month to £200 a month.(we eat a healthy diet)The extra has gone to pay off the mortgage.

4)We meet up with family and friends and enjoy a meal where everyone brings a dish of food and a bottle of wine,so we have a great evening but very little cost.
5) I sell on ebay and any profit goes towards birthdays and christmas.

6) for holidays we house swap,we are lucky to have family in different parts of the world.
My husband is 51 and I am 44 and we cant wait to be free of our mortgage,we dont feel we have gone without.

beachbeth

frosty wrote:

we dont buy ready meals and have reduced our food budget from £500+ a month to £200 a month.(we eat a healthy diet)The extra has gone to pay off the mortgage.

Wow! Thats impressive! How many people does this feed? We tend to eat homemade things most of the time but our bill isn't that cheap! Ours is nearly £100 per week for the 4 of us. (This includes bottles of wine though too! )

frosty wrote: »

We meet up with family and friends and enjoy a meal where everyone brings a dish of food and a bottle of wine,so we have a great evening but very little cost.

We used to do this all the time! Everyone chose what they wanted to bring, be it a trifle or a quiche and we used to take it in turns to host the evening too. We would have a great time at very little cost!

frosty

Hi beachbeth,my food budget is for 5 adults,2 dogs,1 cat and 3 ferrets.
Its all thanks to everyone on the os board,I shop later in the evening so I can buy everything reduced.Last week I managed to buy £35.00 worth of meat and veg at Somerfields for £6.57.We always have wine in the house for when people call in,but we dont really drink .

We wait for a dog food offer at Makro,we buy working dog(no vat)and when its on a bogof we stock up,so the dogs cost pennies a day to feed.

We have themed nights with family and friends,Italian,chinese or pizza ect.Everyone chooses whether to make the food or buy it.I thinks its alot more fun than going to a restaurant and paying a fortune.

GettingThingsDone

I think people 'worry' too much about if they overpay on their mortgage and then die. Don't worry, you'll be dead - use insurance to cover that eventually.

I know that sounds harsh, but the real 'worry' should surely be, what if you overpay your mortgage and then live to have regrets about the things you never did; yes, you could save up and do them later in life, but maybe the moment has gone etc.

Alternatively, if things go well, there will be a long stretch of our lives that we're not supposed to be working (retirement) and we need to worry about the quality of that life.

Anyhoo, everybody knows that already...

GettingThingsDone

And there's more...

As I see it, simply saving money doesn't add up to enough (unless you can save seriously large amounts) so you need to 'plug into' something that has significant growth. Looking back over the economic cycle, wouldn't a profitable strategy to have been along the btl route, and to have sold off any stock that was looking 'risky' by now i.e. use house-price inflation.

What I am saying is, obviously depending on your circumstances the best (and easiest?) way of getting to MF for 'normal' people would have been to use mortgages to move house a number of times, each time trading up, so as to magnify the inflationary effect (i.e. a 10% rise in prices is a larger actual amount on a more expensive house) and then downsize the moment the target amount of equity was reached, pay off the mortgage and Bob's your uncle. No need to overpay, in fact overpaying counts against you as that means you are buying property beneath what you should stretch yourself to, and you were not magnifying inflation. Of course, you would need to buy and sell wisely...

Again, I'm not attacking MFW, just the fact that mortgages give you the ability to invest large sums of money and depending on your circumstances, the economy and luck you should make significant profits Much larger profits than you could 'save', if you see what I mean. In summary, the road to MFW may not just be a matter of overpaying on your existing mortgage.

Like DD, cupid_s and her OH are in a relatively 'unusual' situation (as am I, I suppose), so what's good for one person may not be good for another.

Also, if house prices are falling in your area, then ideally, you would sell your house now, rent somewhere and wait until the prices had bottomed out and then buy your house back (assuming that is where you want to live). Ideally they would bottom out enough so that you could be MF.

As you can probably tell by now, all I am saying is getting to MF isn't necessarily a case of simply overpaying the mortgage!

Beachbeth - it's good to see you've got it all in perspective

gtd

beachbeth

I agree with your comments GTD. This is the sort of suggestion I was looking for when I started this thread. Everyone's circumstance is so different. If you are earning a high salary then you can put your money in different investments and pensions, as well as overpaying your mortgage. If you are more financially challenged then perhaps trying to do as you have said by investing in property and perhaps taking on a higher mortgage may be a better way of doing it.

As you say, it works in percentages. When we first got married the difference in price in our area between a semi-detached and a detached was about £5,000 which seemed a huge amount at the time. Now though the difference is about £30,000 to £40,000 and that £5,000 seems like a trifling amount. I wish we could have moved up property wise years ago because as you say, we could carry on with the mortgage and then eventually downsize to pay it off.

setmefree2

Hi Beachbeth,

Me and Mr SMF are on your no 2 of possibilites - ie the middle way. That is we are trying to get better value for money rather than changing our life or doing without. So in the last 4 years we've reduced our shopping bill by £200 - £300 per month. We've even managed to reduce our bills for gas and Electricity in a time of rising prices. (We reduced our gas by getting rid of Insurance and being more careful. We reduced our electricity by turning things off and getting energy saving light bulbs, etc.) It is possible to save lots of money without really changing your life at all. It just takes abit of time and thought, don't you think? We still have hols (3 weeks in California;)) but have just saved money on boring things. I suppose it depends were you are on your mortgage free journey - closer to the end we'll be more likely to make big sacrifices.

setmefree2

Yep - the're all good points too:D Thanks