Should i pay off my mortgage

Douglas999 · 2 February 2021 at 11:09AM

Want,ed to ask advice from others who may have been or are in the same position, I have recently lost my job. i have a mortgage on a fixed rate util June 2021 at 2.34, i have fund to be able to pay my mortgage and bill for the immediate future whilst looking out for another job although in this climate its a challenge.
Question is should i use my savings and possible some from my allowable 25% from my pension pot and pay the mortgage off, one to reduce my outgoing by £1000 per month and only leave living costs or secondly take the pending offer from my mortgage company who will just transfer my loan with no underwriting to a new deal and use for the immediate future my savings to fund my mortgage. if any is or has been in this situation what did you do and how did it work out for you.
Any advice would be welcome. Many Thanks to you all.

MallyGirl · 2 February 2021 at 12:39PM

If you are out of work then using all your savings up to pay off a low rate mortgage doesn't sound sensible to me. Using up pension to pay off a low rate mortgage sounds even less sensible.

Gary1984 · 2 February 2021 at 12:42PM

No, using a large chunk of cash to pay off a low interest loan doesn't seem like a good move if you don't have any other income coming in. Instead use the cash to live on until you get a new job.

AlanP_2 · 2 February 2021 at 12:44PM

I haven't been in the same position but some thoughts / questions that will help others to make suggestions.

How old are you? You have to be 55+ to acess pensions.

How long to go on the mortgage?

What was the plan for repaying it prior to redundancy?

Is it a repayment or interest only mortgage?

What are the prospects for getting a new job, in your industry (if relevant), in your area and at your age?

How long can savings last until you run out?

If you paid it off, by using some of your pension fund, would you have enough left for retirement?

Douglas999 · 2 February 2021 at 2:11PM

Many thanks for your kind advice,
I'm 55 in August.
Have around 6 years left on the mortgage.
I had planned to repay the loan around 60 paying it with income from work.
Its a repayment mortgage of around 68,000.
Should be able to get another job in the next 6 months or so.
Savings would last around around 4 years if i didn't get new job.
Pension fund is quite healthy, if i took the 25% it would be around £55k
Look forward to any further thoughts and comments.
Many thanks to you all, its just really nice to hear others advice and experiences.

AlanP_2 · 2 February 2021 at 2:40PM

I'd agree with Gary, paying it off and depleting your savings doesn't make sense as you can afford to take a bit of time and see how employment options work out.

CookieMonster · 2 February 2021 at 4:23PM

It's not a good move to pay off the mortgage with the 25% TFLS.
Best thing for your pension is to leave it alone for as long as you can so the money can work for longer.
Maybe get a part time job and eek out your savings to 8 years-worth?

pensionpawn · 2 February 2021 at 4:27PM

As with everyone else keep the mortgage going at the lowest rate available. Over the period remaining your pension should outperform the interest rate and you'll be better off in the long run.

barnstar2077 · 2 February 2021 at 4:45PM

Sorry to hear you are out of work. In your position I would do the opposite, I would extend the mortgage term until your state retirement age. This is what I did, I just told them I wanted to put more money into my pension instead. Mortgage rates are so low at the moment that your money is best used elsewhere. This would have the benefit of making your savings last longer at this difficult time. I extended my term from eight years back up to twenty five years and it reduced the amount I have to pay to less than a quarter of what I was paying (I still have the option of paying it off earlier if I want to at a later date.) Once you are working again you can use the money that you would have been paying off of the mortgage to invest into a pension or stocks and shares ISA, or overpay and clear the mortgage.

Douglas999 · 2 February 2021 at 6:20PM

Many thanks to you all for your advice, i think i will keep the mortgage and use the savings for the time being to fund it and leave the pension alone. This has been a great help and comfort to me during these hard times. Thank you all very much.

IAMIAM · 2 February 2021 at 10:51PM

I love this thread. It seems to be full of the same breed as me. Extend term, keep payments low and build savings, pensions and all else. Then when ready, pay everything off in one swoop!