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

beachbeth

noh wrote: »

I don't know how much you think you need for a comfortable retirement. I have done the sums for myself and calculate I need savings including personal pension of around £400000 in todays money this doesn't include the value of the state pension.
I don't believe you can release enough equity from your house to make any significant difference.

Nigel

If we go by what you say then if we pay our mortgage off early and then put our money away for retirement after this then we still won't have enough savings to give us a decent retirement anyway.

When we first got married we only took my husband's wages into account when we looked for a mortgage. We knew we wanted children so we completely ignored my salary in any calculations. We bought a house we could well afford and had two quite old cars and had no loans whatsoever. We had the 2 children and then over the years all the bills just went up and up and hubby's wages didn't go up the same. Then when they brought in the Poll Tax(:mad: ) our rates were effectively doubled too and money was very tight! Through no fault of our own our financial situation was just getting worse. I had to take on a part time job and we didn't fritter our money away on anything unnecessary. We could no way afford any sort of pension. We got to the point where we were going to have to sell our house and either move in with relatives or into a small flat. If the kids came out of school with a letter in their hand I would be worried sick that they wanted money for a school trip or something because we couldn't afford it.

Luckily my husband found a better job with decent pay and this made things so much better. It took us quite a few years to get caught up moneywise though after falling behind with everything and now, in our 40's, we could take out a pension if we wanted. But the sort of pension you get after paying into one for a relatively short time is quite small compared to the pension you would get if you had paid into one from when you were 20.

Plus, after all those tight years its nice now to have some money to spend and not make ourselves tight yet again by paying our mortgage off.

Dithering_Dad wrote:

I don't know a single person who has lost out with a pension. Do you?

We do know people who have lost out on their pensions too. My brother-in-law is coming up to retirement age and has been paying a pension all his life. He says that, although he is going to get a pension, it is nowhere near the amount that he was promised. We know a lad in his 20's who has spent the last couple of years paying quite a bit of money into a pension and then moved jobs. He has now lost the money he paid in.

macca64

beachbeth wrote: »

If we go by what you say then if we pay our mortgage off early and then put our money away for retirement after this then we still won't have enough savings to give us a decent retirement anyway.

We do know people who have lost out on their pensions too. My brother-in-law is coming up to retirement age and has been paying a pension all his life. He says that, although he is going to get a pension, it is nowhere near the amount that he was promised. We know a lad in his 20's who has spent the last couple of years paying quite a bit of money into a pension and then moved jobs. He has now lost the money he paid in.

Hence why you should save for retirement as early as possible, as your money gets compounded growth year on year. You don't need to invest in a pension for retirement planning, you can use S&S ISA's for this too.

Surely the lad in his 20's hasn't lost the money, he surely can't access until he is 55, the amount stays invested. With regards to your BIL, it might be that due to falling annuity rates, the pension his fund will buy him is not as much as previously hoped for.

Also remember a pension can not loose money as it is only a tax wrapper, it is the investment inside the wrapper that goes up and down in value.

My opinion is that everyone is an individual, so everyone needs to find the balance that suits them. I know people who don't save for retirement, whereas I do, each to there own.

comping_cat

All i can give you, are my reasons for paying off my mortgage.

Firstly, i hate the idea of paying thousands of pounds to the banks, they take enough from us and its going to be a wonderful feeling knowing that in the future, the money will be in my pocket and not theirs.

I also like the idea of the banks not being able to take my home away from me. Once the mortgage is paid, the house is mine and i will be guarenteed a roof over my head.

Im a single mum on a low wage, and im very aware that when my children reach collage years (around 18 - 19) i will no longer receive child tax credit, or any CSA payments, so my money will drop significantly. Now, if i have paid off my mortgage (must admit this isnt likely, if i can carry on like i am at the moment, the mortgage will be paid in 10 years, and my children are 11 and 9, so im a couple of years out) or even reduced it significantly, i will either have no mortgage to pay out, so that would prob make up what i lose in benefits, or if i have a much smaller mortgage, i could maybe re negotiate my terms and then have reduced payments which would be much more managable.

Also, as a single parent, i dont know whats around the corner. if i built up a lot of savings to offset my mortgage and then found i was out of work, then the savings would go against me. If i pay any savings into my mortgage (i can borrow back any overpayments i make) im paying the mortgage off quicker, saving interest and saving at the same time. I would like to stress here, that although i went onto benefits when i split from OH, as soon as i was in a position to work, i did and its that, that has given me the opportunity to get back onto the houseing market, i would hate to go back onto benefits so it would have to be a major disaster to make that happen!!!

I have all my income, which pays our bills (including a small pension i pay into for my future) and gives us a few treats. Any extra work i get, is paid into my mortgage. I also sell on Amazon and ebay, complete paid 2 click sites, survey sites and the odd mystery shop, so all this goes into my mortgage. I also enter competitions, either for things to sell, or make our lives better so there is always something to do.

At the moment im saving my Tesco vouchers for a holiday to Florida - so i def think you can live for today AND tomorrow - paying my mortgage off will give me so much freedom and security. I will be able to help my children through university or buy a house, i wont have to worry about the job im doing, and could even make larger pension payments or have a nice bit to put away in savings. If, once the extra benefits stop i find im not any better off than now, i will still have a house to live in, and as we dont skimp on everything, i would still have a good life, maybe not so many treats/holidays/savings as i would hope to have once im mortgage free, but i wouldnt be in a worse position which is important to me.

Finally, since joining the mortgage challenge (started about 18 months ago, and already knocked 7 years off my mortgage term in that time) i really enjoy looking at my mortgage total each month and seeing it reduce, which may seem sad, but makes me happy, and having a happy life must be what we all aim for at the end of the day, however we do it.

beachbeth

catowen wrote: »

Finally, since joining the mortgage challenge (started about 18 months ago, and already knocked 7 years off my mortgage term in that time) i really enjoy looking at my mortgage total each month and seeing it reduce, which may seem sad, but makes me happy, and having a happy live must be what we all aim for at the end of the day, however we do it.

I don't think you're sad at all. I applaud people like you and endeavour to be like that too (which is why our only loan is a mortgage). I started this thread really because my husband is so anti-pensions and I wanted to see a different point of view. I just wanted other people's opinions about 'living for now' or being frugal.

Also, Dithering Dad, I am certainly not of the opinion that if you pay off your mortgage then you're a scrimping miser. My hubby and I are just at the point of our lives where we need to make a decision about what we are paying out and I wanted to get some input from people who are endeavouring to pay their mortgages off early.

Another thing is that my husband's basic wage is very low and he only earns a decent wage by earning overtime and bonus. This causes him a lot of stress and I was thinking we should reduce our payments rather than increase them in order to lower his stress levels. We have 14 years left on our mortgage and sometimes wish it was gone and sometimes think "to hell with it, we'll borrow a little more and increase the years". Its hard to know what to do for the best really.

djbd1973

Dithering_Dad wrote: »

So basically, you know two people. :rolleyes:

I totally agree with your argument DD, but I do know several people who lost their pensions in my local area when a big printing company went under, and I am in the print myself. There was lots of coverage in the local/national press, and if I am correct, it was even brought up in parliament but to no avail. Still it is a very small percentage compared to the millions that are paying into a pension, and I for one want to get rid of the mortgage as quickly as possible, and to prepare for retirement through a balance of strategies including a pension.

roddydogs

Whilst on this subject im trying to work out some figures, im shore i must be going wrong, but i cant see where at the moment. i have £26000 left on my Mge. this costs £215 PM, with 15 years left-total £38,700. (yes, i know everythings variable)
I have also been putting in almost the maximum into my ISA, so i have the £26000 earning 6% tax free, if i leave it there instead of paying off my mortgage, with compound interest, i will have at least £50,000 in there,at the end of 15 years., so shorely i would be daft to pay it off?
yes i know all figures are not going to stay the same, but this is for example only.
Have i got something wrong?

djbd1973

Dithering_Dad wrote: »

I know that people have lost their pensions, but as you agree it is a very small percentage compared with those who haven't. It's a bit like never using builders or plumbers because someone you know had a dodgy one who didn't do anything but charged a fortune. The answer here is once again the matra of MSE - diversify!! Don't put all your eggs into one basket - put a bit into a traditional pension plan (especially if your employer also contributes), put some into ISAs and put some into savings for emergencies.

Yep - totally agree. You can't hide from planning for the future simply because of a few scares that have happened. It is real to the people that did lose their pensions, but everyone still needs to plan. I would hate to get into a position when I am older where I refuse to turn on the heating in a cold winter because of the costs like some of the older generation currently do.

brownbabygirl

Pay off your mortgage early because if not for you then for your kids! You said you have children so even if you die shortly before or after paying off your kids dont have to worry about repayments, repossession etc

maxmycardagain

dying isnt the problem (well, it IS but it cant be avoided)

the problem is buying a house, then at age 70 needing council care, and said council vultures make you sell your home and they want the money!

legalised theft

roddydogs

maxmycardagain wrote: »

dying isnt the problem (well, it IS but it cant be avoided)

the problem is buying a house, then at age 70 needing council care, and said council vultures make you sell your home and they want the money!

legalised theft

If they didnt do this the money would have to come out of general taxation!
What taxes would you like to go up to make up the shortfall?