Paying off mortgage on flat

Jasjeet54

Hello,

I have a general mortgage/investment query.

I bought a leasehold one-bedroom flat in an outer-London borough in 2015 for £201,500. It has served me well for the past few years (as it provides a reasonably short commute to work), however, it is quite small and I can’t really see myself living there beyond another five years. I hope I don’t have to anyway, and I wouldn’t mind getting out of London.

I was thinking about putting it on the market this year but, as the market is quite uncertain at the moment, I think I might wait a bit and see what happened post-brexit.

My question is, is it really worth overpaying a mortgage – which I can afford to do – as much as possible, even if I plan to sell/move on in the nearish future? I understand that when people have a family home, which will be the place where they retire, it does make send to pay off the mortgage as soon as possible. However, if you’re still young, would it make sense to invest any spare funds elsewhere, which could provide a better return in the long-run? I am happy to over-pay my mortgage a bit, so that I can get a good rate when I next have to re-mortgage, though, as mentioned, I think my next mortgage term would be quite short, maybe two years.

Any advice very much appreciated!

beanielou

I am no expert but in my view always good to pay down the mortgsge.

Jonbvn

OP,

I am not aligned with the consensus on this forum and I agree that the smarter play is usually to invest rather than OP your mortgage, unless your mortgage rate is higher than your return on investments.

There are however some issues you should bear in mind:
1. Would OP'ing your mortgage move you into a lower LTV and lower interest rate?
2. Generally topping up your pension will be more tax efficient than OP'ing your mortgage.
3. How secure is your employment? Having a smaller or no mortgage if you are unemployed for any length of time is obviously a benefit.

You will appreciate that it is not always clear cut. In many cases it is wise to hedge your bets and do both. I.e. split your disposable income between mortgage OP's and investing.