Should we pay off the mortgage?

hanb2

Hi all, 

Hoping for some advice! We’ve finally got to the point of being mortgage neutral and are unsure whether we should now pay it off or whether there’s something else we should be doing! 

We have 14 years left on the mortgage currently and outstanding balance of 122k. House is worth 390k currently. We’re on an employee mortgage at base rate so just moving up to 4.25% and a monthly payment of c.£980 a month (but managed to save lots whilst at 0.1% which was great!).

We have managed to save 126k which is currently in a mix of savings accounts and premium bonds. Max interest is 3.2%.

So we can technically pay off the mortgage which would wipe out our savings but we’d have a spare £980 a month to build up a buffer again if we did do that. 

Paying off the mortgage feels like the logical thing to do but we’ve got quite used to having the security of a big savings pot so the thought of starting again is a bit daunting and we don’t know whether there’s anything else to consider. 

What would you do? 

Thanks for any advice! 

maisie_cat

It's really a personal choice, from a practical perspective leaving a mortgage account open gives you access to further borrowing if required as well as a large savings buffer.
We paid our mortgage off, and have no other debt but have a small amount of savings, we live quite frugally and I personally felt free once we were mortgage free.

Cornish_mum

Hi 
wow that’s great. I would have a good look at your finances in the round including your state and any private pensions, your job security and how to make the money work tax efficiently. Personally I like having cash on hand (just in case something awful happens), I feel this gives me more security than being mortgage free but it’s very personal. CM

South_coast

I would pay it off, but if you're worried about having little savings left then pay it off bar £10k (or whatever amount makes you feel comfortable). I don't see the benefit in holding a huge amount of cash at a lower rate than the mortgage, but as others have said it's a very personal decision

MFWannabe

hanb2 said:

Hi all, 

Hoping for some advice! We’ve finally got to the point of being mortgage neutral and are unsure whether we should now pay it off or whether there’s something else we should be doing! 

We have 14 years left on the mortgage currently and outstanding balance of 122k. House is worth 390k currently. We’re on an employee mortgage at base rate so just moving up to 4.25% and a monthly payment of c.£980 a month (but managed to save lots whilst at 0.1% which was great!).

We have managed to save 126k which is currently in a mix of savings accounts and premium bonds. Max interest is 3.2%.

So we can technically pay off the mortgage which would wipe out our savings but we’d have a spare £980 a month to build up a buffer again if we did do that. 

Paying off the mortgage feels like the logical thing to do but we’ve got quite used to having the security of a big savings pot so the thought of starting again is a bit daunting and we don’t know whether there’s anything else to consider. 

What would you do? 

Thanks for any advice! 

Would you have just 4K left in savings if you pay mortgage off? 

I would be more inclined to save a bit more until you have approx 6 months wages in savings also just in case anything happens but it depends how long that would take to save? 

Well done 👏 whichever you decide 👍

mrpsmith

Pesonally I'd pay off 60k, thus keeping a healthy savings pot, then throw the £500-ish you'd be saving each month towards overpaying the mortgage (assuming that doesn't trigger any ERC)

hanb2

Thanks all!

if only we had a crystal ball huh? 

I guess the other option is pay a chunk off and keep saving to be able to pay the rest. 

We’d have 4k cash savings left if we did overpay with the ability to save £1800 a month+ to build savings back up without the mortgage payments so we are very fortunate. All the big jobs have been done on the house and we recently upgraded the car so have no expected big spends but there is obviously the potential for the unexpected. 

beanielou

I would go half  half for now.