Overpay mortgage rather than save now?

grumiofoundation

DiggerUK said:

As we can see  from the economic storm we are in, paying down debt was always the wisest move.
Fannying around stoozing on savings rates that gave a marginal amount over the mortgage rate is ok, providing at times like this, those savings then go immediately to pay down the mortgage.
There's no need to have an emergency fund at this time, cheap credit card borrowings can cover for emergencies. If access to cheap loans evaporates then rebuild the emergency fund..._ 

This is awful advice.

Precisely because of the economic uncertainty people need an emergency fund more than ever.

DiggerUK

Credit card 0% loans are two a penny at the moment. We haven't had our latest 'special' but it is usually about 1.8% fee and 20 months to clear on borrowing up to £6,500. Holding large funds for emergencies is not necessary.

I have been a big advocate for paying down mortgages, as opposed to increasing pension payments or investing. Entering this coming economic phase without having done as much as possible to reduce debts will not prove to have been bad advice..._

grumiofoundation

DiggerUK said: I have been a big advocate for paying down mortgages, as opposed to increasing pension payments or investing. Entering this coming economic phase without having done as much as possible to reduce debts will not prove to have been bad advice..._

So because you have been a big advocate for it it is good advice?

Chances are you will have lost and will continue to lose money overpaying mortgage versus investing/pensions/even a lot of savings accounts but you clearly you have decided you know best. 

Credit card 0% loans are two a penny at the moment . 

At the moment being the key - thats why having an emergency fund is important. 

Holding large funds for emergencies is not necessary.

You are very absolute aren't you? 

bowlhead99

DiggerUK said:

Credit card 0% loans are two a penny at the moment. We haven't had our latest 'special' but it is usually about 1.8% fee and 20 months to clear on borrowing up to £6,500. Holding large funds for emergencies is not necessary.

So you expect that they are two a penny, but you haven't had one recently, meaning that all you have to go off is the rate you were quoted in a different economic environment - prior to hundreds of thousands of businesses shuttering for the next few months while millions of people go on the dole?

Perhaps they are not two a penny, 'at the moment', or at least will not be after another few months down the line when the emergency free credit is actually needed.

Unfortunately if you have used up your emergency fund in paying down a mortgage, the only way you can definitely ensure you can have emergency monies available by loan or credit card transfer later, is to pay to borrow the money now without actually needing it , just in case you aren't able to get it if you apply later. But that would mean paying arrangement fees or interest charges to get hold of the funds to bank them now, perhaps unnecessarily.  Doesn't sound very MSE.

Alternatively you could spend your emergency fund on paying down the mortgage now, wait until the emergency funds are needed and then hope an offer drops though your mailbox at just the right moment, and if it doesn't, call to find out whether free or cheap emergency credit is still available to you. What happens if you wait until the emergency funds are needed and then find that free or cheap credit is not available? You won't be able to turn back the clock and take a different course of action.

Burning through your emergency fund to pay down cheap mortgage debt ahead of a recession seems a gamble. I would rather enter a recession with a cheap mortgage than with nothing in the bank.

Roygroyg

I've got a Nationwide mortgage and currently using previous overpayments (many years back having moved on to new deals a few times) to only pay a minimal amount for next few months. If yours also allows that then it gives you an extra potential boost to any emergency fund you might need to hold in future.

If you already have an emergency fund I wouldn't rule out investing excess cash instead. In an earlier share slump (Euro crisis 2011 I think) I switched from paying down my mortgage to actually remortgaging for more to invest and proved in end to be best investment decision I've ever made. I am not recommending this as high risk strategy only few would be comfortable with but investing in some quality companies for long term now with spare cash possible alternative strategy. A lot depends on the rest of your situation as too few details to know if sensible or even if you are comfortable investing.

DiggerUK

bowlhead99,

We are both currently paying off 0% cards, it saves us having to sell as much gold.
Bucket list cruises may be postponed, but they still have to be paid for.

Mortgage debt isn't free with interest payments on top of repayments. Getting rid of the mortgage, especially now, is the wisest move. With no mortgage to pay, building up a cash pot will be very simple..._

katsu

We paid off our mortgage and the security is priceless.  It reduces our monthly outgoings (so we can save that money from income and if things get worse we have less costs to fund, as has been said above).  I would never pay off the mortgage and leave yourself without emergency cash (being able to shop online at dearer prices than good old Lidl, Poundshops, Savers etc has pushed up our spending on the essentials but we know we can afford that).  
For me the security is really valuable.  
I did keep saving into my pension throughout the time I paid off the mortgage and haven't cut my contributions at this time as in the longer term the market will recover by the time I am in my 60s I believe.  

grumiofoundation

DiggerUK 
Getting rid of the mortgage, especially now, is the wisest move.

Just because you keep on saying something is wise doesn’t make it wise. 

Thrugelmir

grumiofoundation said:

DiggerUK 
Getting rid of the mortgage, especially now, is the wisest move.

Just because you keep on saying something is wise doesn’t make it wise. 

As this crisis unfolds going to be apparent who is overleveraged. 

Sailtheworld

Thrugelmir said:

grumiofoundation said:

DiggerUK 
Getting rid of the mortgage, especially now, is the wisest move.

Just because you keep on saying something is wise doesn’t make it wise. 

As this crisis unfolds going to be apparent who is overleveraged. 

You used to say (probably no more than three days ago) that cash is King. A few extra months of mortgage payments as cash might be just as wise as paying down a mortgage. Especially given the cost to hold leverage right now is miniscule.