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

maxmycardagain

DickDastardly wrote: »

maxmycard, I really dont get it..? If I am right from your other posts, you have debts right? So at some point your philosophy has got you beyond your means, yes? So how do you now argue that its okay to spend purely for enjoyment and ciritcise savers?

Curious indeed..

quite right

i have debts, mostly because the system we are all in allows ltd companies to fold owing me £12,000, i then have to fight a rearguard action.

i didnt just spend and accumulate debts, at least 50% of mine are down to others.

ailuro2

By overpaying on our mortgage it means the mortgage payments can still be handled by the spouse left behind when the other one gets hit by a bus! Which means our 8yo DD would be missing a parent but not having to move home/schools etc. too. if the worst ever happened.

Yes, it does happen- a firend of a friend's husband was killed in an RTA two weeks ago, leaving behind a wife and two yound daughters, 5 & 7 yo. These things happen from time to time, so I like to think MY family wouldn't need to worry about money if tragedy struck.

robp

Dithering_Dad wrote: »

SAP is the name of the software company that created the business software that I help companies configure to match their own business processes. It costs £0.5M just for the software, so only the larger companies have it (microsoft, Heinz, lots of goverment departments & councils, ICI, etc).

More about SAP....for any who are interested!

My wife also runs her own business consulting as a SAP Business Analyst.

She used to be a trainer, but moved to the BA path to help us pay off our mortgage earlier....the rates are better as I'm sure DD knows. She tells me SAP stands for Salary Advancement Programme! (Not really, it's Systems Applications in Production).

It's an Enterprise Resource Planning system, which consists of a variety of modules each of which can be customized to suit business processes.

There is a low-end version of SAP (mySAP) which is more suited to smaller businesses, but she's not sure of the cost.

djbd1973

robp wrote: »

More about SAP....for any who are interested!

My wife also runs her own business consulting as a SAP Business Analyst.

She used to be a trainer, but moved to the BA path to help us pay off our mortgage earlier....the rates are better as I'm sure DD knows. She tells me SAP stands for Salary Advancement Programme! (Not really, it's Systems Applications in Production).

It's an Enterprise Resource Planning system, which consists of a variety of modules each of which can be customized to suit business processes.

There is a low-end version of SAP (mySAP) which is more suited to smaller businesses, but she's not sure of the cost.

This all sounds like rocket science to me but very fascinating and sounds like it is very rewarding. Thanks

DickDastardly_2

maxmy, thanks for your candid reply. A different spin on things for sure, but aren't your business debts seperate from your personal debts? Spend now, pay later on personal finances is a deadly trap - I k now I have been there, but i had no-one to blame but myself. No-one made me go shopping and drinking and partying, only me and I paid for it many years ago. I now see that saving and keeping out of any debt at all (I have none bar the mortgage) is better. Business debts, I sympathise being self-employed - the current system sucks, but if things are that bad, I would look again at if staying in business is the best thing for you? Financially it can sometimes make more sense NOT to be self-employed especially if you are regulalry not getting paid for work - anyone can sit at home and earn sod all!!

Hope you find what you're looking for.

Hotspur

Why pay off the mortgage? Well, apart from saving the interest it also assists with the unexpected where you may not be working. I am about to be made redundant with 8 years and over 50k left on my mortgage and potentially no income from future employment.

I'm think I am lucky as I will be getting a pension from when the redundancy starts and a lump sum which will go a long way to paying off the mortgage and becoming debt free . However, without the foresight 30 years ago that things might go wrong I could be left without my home and as importantly my lifestyle. With a pension, savings and investments life will be easier.

Always a personal decision but, for me, some 'live for today' and some 'save for tomorrow' is the best balance and allows you to have some of the good things in life along the way.

djbd1973

maxmycardagain wrote: »

quite right

i have debts, mostly because the system we are all in allows ltd companies to fold owing me £12,000, i then have to fight a rearguard action.

i didnt just spend and accumulate debts, at least 50% of mine are down to others.

Hi Maxmycardagain

Last year I worked for a Limited company. We got hit by lots of bad debt that in turn caused us to go into liquidation due to poor cashflow. This caused my reputation no amount of damage especially as I started up on my own on the back of it and people started chasing me for the money and it wasn't to do with me.

However, we got ourselves a credit card machine and we don't release jobs without payments. Unheard of in my trade but I figured this is how my former employers could have avoided going bust, and Tesco etc don't give 30-120 days credit so why should I. Its working well.

GettingThingsDone

@DitheringDad. You prove my point exactly.

I hadn't thought about it much lately, but I read a similar post to the OP and it got me thinking - what if 'Paying off your mortgage early' is a bit like mortgage-misselling i.e. before you go ahead and do it there should at least be a check-list or something?

Are there going to be people regretting putting so much of their cash into a relatively illiquid asset?

As for me - I got a plan see...

gtd

Hereward

Dithering_Dad wrote: »

If you mean that I have proved your "mortgage payment is irrational" point, then I'm afraid I haven't. I sought financial advice from an IFA and he tried to sell me investment plans and insurance plans that would have netted him over £6000 in commission payments. Advising me to continue my mortgage overpayments would have netted him over £0 in commission payments.... do the math and think which option a "financial professional" would advise :rotfl:

The days of cheap credit is coming to an end - Northern Rock found that out the hard way. When your mortgage rate starts pushing 10%, will your other investments beat that? Will you be able to afford to invest any money when your mortgage is sky high?

Debt repayment is the future

Do you have a problem with Tesco's making money every time you shop there? I would expect an IFA or recommend the best course of action for you, irrespective of the commission that they receive. You need to make sure that you visit an IFA and not an advisor from a bank/insurance company, and provide them with all of your details.

Investments vs. mortgage repayments isn't an either or situation as you can always take get a new mortgage to help boost your investments (this is not recommended BTW) or sell your investments to pay your mortgage. If mortgage rates hit 10% again, I suspect that most people would cash their investments in and use the capital to reduce their mortgages. (Of course there is no guarantee that the investments will be worth what they paid form them, the same applies to your home.)

duchy

busy_b wrote: »

I,m in a position to pay off my £36,000 mortgage (against a 200k property) but haven't got the nerve to do it! I have therefore pondered on offsetting my savings for all the reasons stated above.

We ran a successful business but made a huge decision to downsize when we had accumulated enough savings to pay off our mortgage. We are in our late thirties and only had our two children late and so now want to enjoy life with them.

I know we would struggle to build up savings on that scale again and so I don't think I can just hand it over to the mortgage company and know it's gone forever!

I have ten years left to run on my current mortgage and so by offsetting my savings, I have access to them but unless i touch them my mortgage is effectively paid off (in my eyes).

I haven't got a clue if I'm doing the right thing and have spent 12 months pondering on whether or not I should just pay off my mortgage in full and be £400 a month better off. Somehow that's not the same as having 36k in the bank though!

We're in a fortunate position but have worked like crazy to get here and still don't know the answer - should we pay it off and it's gone or should we be secure in the knowledge that we can pay it off if ever we want to but still have access to the money if we need it! Who knows?????

Have you actually calculated the difference in interest you'd pay if you paid your mortgage off now compared with 10 years time ? It's a startling figure and I think you'd find it hard to find an investment that would bring the same return without high risk.I'm not saying you should pay it off-just that you need to be fully informed when deciding.