Should I pay off my mortgage?

w00519773

I have about £30,000 on my mortgage.  It has a fixed rate of 2.75% for another 2.5 years.  I am told that I can pay a large proportion of it as a lump sum avoiding fees.  I must continue paying £10 PCM until the end of the term to avoid fees.

I am 40 years old; single with no dependants.  I have saved my disposable income over many years and am now fortunately in this position.

I have about £40,000 in cash and £15,000 in shares.  If I paid off the mortgage then I would have six months of salary in cash as an emergency fund.  

I think the answer to my question is: "it depends".  I am thinking about:

1) Pay off the mortgage
2) Keep six months of salary in cash as an emergency fund
3) Any money that is left - invest.  Perhaps with an adventurous attitude to risk.

I would be grateful for thoughts; particularly from those who have paid off their mortgage and those who have the means to pay off the mortgage but decided not to.

TimSynths

£20k right now into a Vanguard stocks and shares ISA. Pop the other £20k into it in April. Continue to pay mortgage and watch your money grow.

w00519773

TimSynths said:

£20k right now into a Vanguard stocks and shares ISA. Pop the other £20k into it in April. Continue to pay mortgage and watch your money grow.

The 15K is already in the vanguard 80% fund.

SuperHung

Depends on what you want to do in life. If I achieve the immortal goal of mortgage free but no wife or kids or family, life would feel slightly empty for me.

FtbDreaming

I’d probably pay it off of it was me. You’ll still have cash left over and can easily rebuild savings with no mortgage. It also gives you freedom/ flexibility if you want to make any career changes you know you’ve got a secure roof over your heading income was to decrease. 

MovingForwards

In your situation:

How much are your ERCs (a)? Compare that to the amount of interest you would save (b)?

If a - b is the same or leaves you in a better position, pay it off.

It then means you've a roof over your head, with only maintenance and insurance costs for it. Savings can be built up again and you've flexibility with working.

Knapper

In my opinion there is little quite as important as owning your own home outright at this point in time

A home is a prerequisite for human survival.  I made sure to pay off my mortgage years ago and will now never ever take on another.

I achieved this by switching to an offset mortgage in which interest charges were calculated daily.  I piled every last penny I had into that offset mortgage which had the result of drastically reducing the amount of total interest charged which in turn took years off the repayment period.

The world is very much changing right now and the public in my opinion is still blissfully unaware of the economic damage caused by Covid and the lockdowns but it will hit them very badly when the hyperinflation comes and the prices of everything utterly skyrocket.  Many will then find themselves in very deep debt.

I would also Google "The Great Reset" and listen to the more non-mainstream sites who outline what they believe is imminently coming.   I believe the currently low and tempting mortgage rates won't last and will suddenly rise dramatically leaving people stranded at which point the fringe websites suggest that the State will then offer to take your house from you but let you rent it back from THEM.   The motto of the Great Reset is "You will own nothing and be happy"

Up to you whether you believe any of this.

I remain very very concerned about what's just around the corner but I have the peace of mind to know that I have already paid off my mortgage long since and thus own a home.  I will never give up that home.

The world is changing very rapidly imo.  The old wisdom no longer applies imo.

It's time to look at the very basics of life, shelter, warmth, food, drink and health and ensure that you have them all covered imo

xepija8686

SuperHung said:

Depends on what you want to do in life. If I achieve the immortal goal of mortgage free but no wife or kids or family, life would feel slightly empty for me.

How can OP change this via the financial choices they’ve set out?

ChristyHam

Interested to know what you decided to do. I to am in the same position 30k left on my mortgage and 30k saved which has taken a hell of a lot of work. Turned 40 last year and dream was to be mortgage free. My worry is that although I am in a fairly secure job there is so much negative news out there I think am I better to just hold out to see what this year brings. 

jimjames

w00519773 said:

I would be grateful for thoughts; particularly from those who have paid off their mortgage and those who have the means to pay off the mortgage but decided not to.

We invested the money into S&S ISA that we could have used to pay off mortgage. We could have paid off the mortgage at least 5 years ago but decided to keep the investment going instead. Although some people like the feeling of being mortgage free, for me it was at least as good knowing I had a pot of money growing that could clear the mortgage if I so wished or had any issue that meant I was unable to pay. The investments are now double what the mortgage balance was originally and the mortgage will be cleared by the end of this year anyway so it's all worked out although the last 10 years have been pretty good for investing.

A lot comes down to your attitude to risk, some people prefer the certainty of the mortgage being cleared rather than the value of an investment pot going up and down each day.

w00519773

There was an interesting article in Investors Chronicle this week, which talked about this and an economist said that interest rates are likely to increase in the future so it may be more worthwhile to pay off the mortgage.  I still have 2.5 years left with my fixed rate of 2.75%.