Fully repay mortgage NOW - yes or no?

DrHyde

Hi,
In August I could make a penalty-free overpayment (paying £11k) and be mortgage free. It's an appealing thought but I wonder if it's the best thing to do.
Context:
I'm 38 and live in a flat with my family of 4. The kids will require moving into a bigger place in 5-6 years and one way to do this might be to build into the roof. This, however, will require a budget of about £150k.
Currently, I have roughly £65k in savings and investments (£45k in cash which is a lot but I'm fearing the end of the bull run for a long time now :mad:) and we can safe around £1000 a month which we tend to put in a S&S ISA.
I can obviously afford to repay the mortgage. But it may be wiser to invest it so as to get closer to that £150k figure in 5-6 years.
I'm also wondering: if I still had a mortgage at the time I will make the home improvement, I would most likely still require a loan (perhaps of £30k) and it appears that this might be cheaper when remortgaging with my current provider than when going to another lender.
I would welcome your thoughts.
Thank you,
DrH

Zero_Sum

Its peace of mind v a bit of effort &/or some risk

You could get a better rate than your mortgage on a fixed term savings bond. Along with drip feeding regular savings and high interest current accounts.

There is also p2p where you could get 6% ish

Paying off mortgage is the easiest option

20SmthngSver

I'd unquestionably pay the mortgage off, especially if you have £65k in savings. I don't see why you wouldn't it pay off.

jaybeetoo

If you pay off the mortgage you may get cheaper insurance - my house insurance premium went down when I paid off mine.

Alexland

We are also in our 30s and could have fully repaid our mortgage if we hadn't made such high pension and ISA contributions. However paying back such a low interest loan seems a waste when we can get both tax advantage and better long term growth from our investments.

I would keep the mortgage going as it might be a useful way to borrow in future.

Alex

Zero_Sum

jaybeetoo wrote: »

If you pay off the mortgage you may get cheaper insurance - my house insurance premium went down when I paid off mine.

I didnt on last house. Cant even remember it being asked on application

BoGoF

The most important factor, which you didn't mention, is mortgage interest rate?

20SmthngSver

I understand that people may choose better rate investments, but I'd rather be debt free sooner. Mortgage is a debt at the end of the day. I'd rather be debt free and free to have investment opportunities after.

colsten

It's simple: can you get a higher interest rate (/return) on your savings than the APR you pay on your mortgage? If yes, keep the mortgage going. If no, pay it off.

DrHyde wrote: »

......moving into a bigger place in 5-6 years............

......it appears that this might be cheaper when remortgaging with my current provider than when going to another lender

long term planning is all very well but to predict the mortgage market 5-6 years out and to expect some sort of a loyalty deal from your current lender is going into serious crystal ball territory. How much interest would you have paid on your remaining mortgage by then? See above......

chockydavid1983

I have almost as much in savings & investments as I do in mortgage debt. Since my mortgage interest rate is only 2%, it makes sense to invest as the expected long term returns are greater.

steampowered

colsten wrote: »

It's simple: can you get a higher interest rate (/return) on your savings than the APR you pay on your mortgage? If yes, keep the mortgage going. If no, pay it off.

Remember tax as well.

People are able to get tax free returns in future by using up their ISA allowance. Likewise, people are able to get tax relief by paying into pensions.

So the tax relief of investments should in effect be added to the higher interest rates on investments, if we are comparing it to the APR on a mortgage, given that there is no tax relief for paying off your mortgage.