Paying off your mortgage

jamels2

Just wondered if in this day and age paying off your mortgage where you live is a good achievement and a long way towards a nice retirement?
Some people still talk about buy to let but it doesnt to me look as easy as it once was and means borrowing money/ leveraging.
Thoughts welcome.

G_M

That seems like 2 totally different Qs.

BTL is not as attractive as it was due to tax changes. But still has benefits long term. Whether it's the best use of your money (and time!) in terms of pension provision is a personal decision.

I always paid down my personal mortgage when I could and was very happy when I finally got rid of it early. Whether it's the best thing to do depends on other personal matters eg

* what's the interest rate?
* do you have other debts and if soat what interest rate
* do you have savings & at what interest rate
* do you have investments and what are they achieving?
* not to mention other personal circumstances like family planning, desire to leave work and travel, etc etc

walwyn1978

Paying off mortgage is a good thing if you don't have other debt at a higher interest %.

Additionally, check your mortgage T's and C's. Is there an overpayment limit per year? Are you financially penalised if you do go over that? Not all mortgage have this but some do.

SeagullFTB

We're in the south east and properties are notoriously expensive, so getting on the property ladder is an achievement. Building up equity to then move to a bigger family home is the next step. But paying off your mortgage is always the ultimate goal and would definitely go a long way to setting yourself up for retirement.

ReadingTim

jamels2 wrote: »

Just wondered if in this day and age paying off your mortgage where you live is a good achievement and a long way towards a nice retirement?

I'm not really sure what you're trying to say or ask here, but why wouldn't you want to have paid off your mortgage by the time you retire?

Why do you think having a mortgage post-retirement, when your pension income is likely to less than your previous employment income is a good idea?

hazyjo

I think the OP thinks that some people are able to retire when they've paid off their mortgage. I certainly won't be able to lol.


Or perhaps they think the money you'd spend on a mortgage would be put towards a pension for a wealthier retirement? Not me, I'm downsizing my mortgage, but will be spending it on fares and living.

AnotherJoe

Judging by the wannabe mortgage free forum, there are many people losing a lot of money by paying off their mortgage at all costs at the expense of their pension, as well as their general lifestyle. . Especially those who are higher rate tax payers.

Long term pensions will return much more than the rate on most mortgages (especially when tax relief is taken into account) , and inflation is also whittling down mortgages. Starting early on a pension which returns much more and giving it the maximum time to grow, makes it much more likely you will have a richer and earlier retirement than if you plot your after tax earnings into paying off a mortage that effectively is likely at zero percent.

So, whilst clearing a mortgage is a nice milestone to achieve and you may then start paying more into a pension, it's got a lot of catching up to do.

Rosemary7391

I think there's a lot to be said for the security aspect of it - losing your income doesn't mean losing your home because you're unable to pay the mortgage. That might override other financial concerns for some.

AndyT678

walwyn1978 wrote: »

Paying off mortgage is a good thing if you don't have other debt at a higher interest %.

And if you can't think of any better use for the money...

My S&S ISA increased by about 35% in the last year or so and my pension AVCs pretty much doubled including the tax relief. :beer:

Very glad I didn't waste a single penny overpaying a 2.49% mortgage.

Marvel1

From my mates own experience of being. Landlord and reading threads it's not something I can be bothered with doing.

TBagpuss

AnotherJoe wrote: »

Judging by the wannabe mortgage free forum, there are many people losing a lot of money by paying off their mortgage at all costs at the expense of their pension, as well as their general lifestyle. . Especially those who are higher rate tax payers.

Long term pensions will return much more than the rate on most mortgages (especially when tax relief is taken into account) , and inflation is also whittling down mortgages. Starting early on a pension which returns much more and giving it the maximum time to grow, makes it much more likely you will have a richer and earlier retirement than if you plot your after tax earnings into paying off a mortage that effectively is likely at zero percent.

So, whilst clearing a mortgage is a nice milestone to achieve and you may then start paying more into a pension, it's got a lot of catching up to do.

I think this is a good point. Personally, I've chosen a middle ground - I do overpay on my mortgage as I'd like to be mortgage free, but I also pay into a pension and other savings, so I don't have all my eggs in one basket.
Quite apart from anything else, my income varies a fair amount as I am self employed, and overpaying the mortgage means I have a cushion in place - if we had a lean year I could cut (or in a really bad year, stop) my mortgage payments, without going into arrears.

If I stopped paying into the pension and paid that money off the mortgage instead i could probably be mortgage free within 5 years, but I'd lose out on the tax break and growth on the pension contributions, so it would not be a good plan, financially.