WHY do you want to be Mortgage Free?

Escapar2020

For me it's because I don't like the idea of being tied down for decades, so the sooner I don't have to think about the mortgage, the better! I've switched from op to offset savings, I feel more in control knowing there's some cash if I ever need to change my plans. As I get closer to being mortgage neutral though, I think more about what happens next. I would like the choice to work and live differently, which will probably mean less salary, but also less pressure and less commuting time and costs (currently 2 hours a day and £300 a month). On the other hand, I'm putting nearly £1000 a month towards that mortgage now, and it's tempting to think what else I could do with that money if I kept this job. I'd want to invest in either more pension or another property to help boost income in future.

Brambleberry

Humans are interesting, even when someone points out the most economically efficient spending choices, our own preferences, hopes and fears play their part in our final decisions.

We want to be MF to reduce the amount of interest we need to pay over time and the "one-way only" overpayments work like a virtual savings account for me. While I'm still working, my DP only has a small pension, so no mortgage would be reassuring. I have a pension and some other investments and savings, so I consider my overpayments as one part of my financial portfolio.

I hadn't considered bexster1975's point, but it does make so much sense. I know how much we need to live on, and how much I need to save for the nice things in life and also for various safety nets - having no mortgage payment will most of these easier to achieve.

lippy1923

Being honest I am not educated in investments. I don't really have the knowledge about that kind of thing nor the bandwidth to change that right now. I have a FT job, studying my degree in the evening and trying to raise my son and keep my household in order, while maintaining some sort of social life.... I physically do not have time to sit and learn how to invest wisely.

Not to say I haven't invested in S&S in the past, I have and I got lucky and it returned very well. But I wont pretend I had a clue what funds/ platforms I chose. Same goes for my pensions. Im in my 20's so I still have plenty of time to learn.... I hope.

For now, I am more concerned with the short term looking to move up the housing ladder to my forever home. To do this, I need to save a considerable sum of money. A 4 bed detached house in my area is easily over £600k so clearing off as much of my current mortgage as quickly as I can will enable me to put a good deposit down.

Urbanshyne

The argument for stock investment over over-paying your mortgage is a completely rational one. It's probably also true that paying into a pension returns greater rewards over time than focusing on your mortgage. But a mortgage seen to its conclusion is a fixed cost for 25 years or more which has to be paid every month without risking the loss of your home. And before all else, we need somewhere to live. So, to my mind, overpaying a mortgage is a financial no brainer.

Novice_investor101

I was overpaying mine by £100 a month for the first 5 years. Now, I've switched to putting most of my spare income into a S&S ISA, my pension & a LISA, & cash savings. Overpaying first was to build up a buffer as it means I've overpaid enough to take a 6 month payment holiday if I ever lose my job etc.

At 5 years in, I switched to investing as I know that time in the market is one of the biggest drivers for capital growth & waiting 10 or 15 years to pay off the mortgage before starting to seriously invest didn't make sense. I also realise I need that money to pay for things like work on the house, a new car eventually etc.

I still overpay a little - I keep my mortgage payment at £350 a month regardless of what the contractual payment is. Atm, that's only a £22 overpay a month, but will increase over the years as the contractual amount drops & my payment stays at £350pm.

Any future payrise I get will go towards the investments & cash funds. I don't intend on moving house anytime soon, but do look to improving the house & need cash to do it. I think once the mortgage gets to a lower amount, like below £20k, I'll probably start throwing more at it, but that's years away yet.

AnotherJoe

leonfocus wrote: »

Instead of overpaying the mortgage, why don't MFWs look to invest the additional money, such as into a S&S ISA for example?

.... or better, a pension. There are many high rate tax payers here throwing away literally multiple tens of thousands of pounds by overpaying rather than grabbing 40% tax relief (before it goes may be as soon as this next budget)

I think the general plan of many is to pay the mortgage off then start paying extra into a pension, but that's the wrong way round. Mea Culpa. I reckon I'd easily have another £100k in my pension if i had done this but it was years back and i didnt realise. No excuses these days with all the info around.

leonfocus wrote: »

It is just so one can brag of being MF and having the peace of money that the house is paid off?

I think its because a mortgage is an obvious debt with a big scary number associated with it, so that incents people to pay it down. Whereas whilst a pension should be the same, eg its a debt to your future self you need to pay off, its not as visible plus unlike most debts its always positive so it seems OK even if in reality its inadequate.

But if, lets say you need £500k to retire comfortably, instead of seeing you have £100k in your pension and thinking "hmm thats a good sum but i dont really know what it means", your pension statement said "you owe your future self £400k" people might alter their priorities.



Mortgages will be taken care of by time and inflation (many forget that the final pounds they pay off are affected by inflation so they are likely worth half or less than the first pounds they pay off hence rushing to pay off is a double negative whammy) but a pension wont be taken care of unless you do something positive. Every high rate tax payer here paying £100 off their mortgage could instead be getting that in their pension for £60.


Trouble is this is a cheerleader forum for paying your mortgage off, nota forum for rational advice on best ways to allocate your money, and its an end in itself with most not even considering the alternatives or discounting the alternatives as they focus on an extra tenner here or there off the mortgage as thats the easy target to aim for. And then when they are 50 to 60 and realise they have an inadequate pension they will probably find its too late. I worked it out just in time would have been a lot easier if I'd twigged it ten or twenty years earlier.

Mojisola

If you are renting and fall on hard times, you can claim help with your rent and that will be paid for as long as you need it.

Struggling financially with a mortgage can mean you lose the house.

I like the security of having the mortgage paid off.

newgirly

For me it's not necessarily because it's the most efficient place to put any surplus money, its the security of having a lower payment if something goes wrong, which for us personally has happened in the last few weeks. Had we invested the extra cash into our pensions we would have fewer choices now.

greent

leonfocus wrote: »

It is just so one can brag of being MF

Really?? I hardly think that this is the case - most of us on the MFW board do not talk about our plans much in 'real life' - many others aren't of the same persuasion - let alone 'brag' about them. Whilst we might say about things on this board, it's not to brag.

We paid our mtge off ahead of investing in our future selves via S&S ISA/ pension. OH is now s/e and we would not get anything like our previous mtge deals. Also from a mental health point of view, clearing the mtge was massively important to us. OH has had 2 long periods of no contracts (approx. 1 year each) and not having a mtge to pay means our monthly outgoings are massively reduced.

We are now putting more into pensions and have started a S&S ISA, but we did this knowing we were doing it the 'wrong' way around (as in we could have got a better return changing our priorities) However, we do have older deferred defined benefit pensions which give us a good pension amount as is, without taking into account SP and we also have a BTL property (which we are now paying down the mtge of)

For us it was the right way to do things, even if not the most financially efficient. Never underestimate the security of knowing you own your own home outright

VDOT47

In the short term, it is to build up as much equity as possible to allow us to move house in the next 18/24 months into our 'dream home' (hopefully!) - paying into pensions would mean the money was 'lost' for that purpose, whereas overpaying saves on interest and also keeps the money available in the form of equity.


Once we have moved, I suspect I will spread any surplus cash a lot more widely between overpayments, pensions and other investments, but for now overpaying alone seems to make sense.


In the long run, the idea of no longer having to find £1200-1500 pcm to pay to a lender seems like a big attraction and, as said above, would create much more flexibility in terms of work.