Time or Money or Happiness - What is your choice

Phossy

Invest or pay off your mortgage - Good video here https://youtu.be/9MfCVkRvjQs?si=RAl98Cw5ld1cQ_V9

daz378

2 years if possible when I'm 60...not had proper holiday since 2018.... try to put away minimum 100 a month, usually 150..job is stressful,  unsociable hours...probably  when I reach 60 may go another 6 months...or may knowing I can quit, feel less pressure,  carry on...taking things a day, week, month at a time

Pat38493

By way of a data point - in the tax year to 6th April 2024, my overall investments made about 12% return, whereas my mortgage interest rate is fixed at 3.54% till August 2025.

My working assumption is that as long as I averaged greater than 3.54% returns over the 3 year fix I am better off keeping the mortgage running.

Moonwolf

I've been thinking about this a lot as I have been thinking about my pension and going soon.

For me a big driver is health, I have had two different unrelated cancers and a thrombosis in the past five years, that is a big kicker to leave.  Fortunately I have made a reasonable recovery and for example am running a 27 minute parkrun which is a long way off good but still acceptable for a 58 year old with health issues.  I can still do things but who wants to retire and die or retire and be trapped at home by illness soon after.

Also I wasn't enjoying work, although ironically I am now.  There have been a lot of changes and I had been fairly expert in something called Oracle with 25 years experience.  It has taken me a while to get into python and cloud computing but now I am beginning to get there I'm enjoying work again.  For the uninitiated it takes a couple of days to start programming in a new language but at least a year to get clever in it.  For me it was closer to three years which I put down to lockdown, lack of joint working and just being a bit slower at learning new stuff than I used to be.

Finally money is an issue, I don't want to retire to poverty but I don't really know how much I'll really need.  I have a budget, two in fact one for early retirement and a more basic DB backed one one for later or if my plans go awry.  However as most on here will know, plans are difficult unless everything is covered by inflation protected DB schemes.  How much will it cost me to fill that extra free time? What will inflation be like?  What will my growth above inflation be?  What happens if/when there is a major market crash?  Will I need care? Since there are few guarantees a huge amount of the wait to go is in working out when I feel safe, which will be different for me than others and might still be too early or too late.  

I think I have decided to go at the end of next March but I'm sill running the numbers almost every week.

michaels

Well done learning Python.  When I was young I found I picked up programming languages without even thinking about it but now my brain seems to be entirely resistant, stuck on Excel does everything I need why should I put the time and effort into R?  Against that there is of course chatgpt which can pretty much right the barebones of any code for you to tweak.

I am now thi9nking of going to 60% FTE for the next year (worked over 4 days) so I only have to do 2 days a week in the office which according to my spreadsheet adds a whole £1500 per year to my spend for the year and every year for the rest of my life. 

I wold probably just go now except (a) I can not take pension for another year so am 'at risk' with regards to any changes Labour introduce and (b) I would be 'retiring from' rather than 'retiring to'

Exodi

Pat38493 said:

By way of a data point - in the tax year to 6th April 2024, my overall investments made about 12% return, whereas my mortgage interest rate is fixed at 3.54% till August 2025.

My working assumption is that as long as I averaged greater than 3.54% returns over the 3 year fix I am better off keeping the mortgage running.

 A relatively unpopular view on this forum as I think a lot of people place higher value on the emotional notions like security, though I totally agree and do a similar thing (even where interest rates are higher). Contrary to general sentiment, someone with a reasonable time horizon (talking decades, not months/years) should not really consider overpaying their mortgage at all in favour of investing, in strictly monetary terms.

I don't know about you, but eventually people will run into the pseudo-paradox, whereby they build up £250k in investments (for example) and eventually their mortgage balance organically decreases to the same level... but applying the same logic to not overpay in the first place, means you would not sell off your investments to pay off your mortgage as they should continue to provide a greater return than you pay in interest. So you end up paying your mortgage over it's original term and building up a stonking great savings pot.

That said, at some point we'd cash in and discharge our mortgage before the end of the term. I suspect holidays are probably more enjoyable in our 40's or 50's than in our 70's or 80's.

Pat38493

Exodi said:

Pat38493 said:

By way of a data point - in the tax year to 6th April 2024, my overall investments made about 12% return, whereas my mortgage interest rate is fixed at 3.54% till August 2025.

My working assumption is that as long as I averaged greater than 3.54% returns over the 3 year fix I am better off keeping the mortgage running.

 A relatively unpopular view on this forum as I think a lot of people place higher value on the emotional notions like security, though I totally agree and do a similar thing (even where interest rates are higher). Contrary to general sentiment, someone with a reasonable time horizon (talking decades, not months/years) should not really consider overpaying their mortgage at all in favour of investing, in strictly monetary terms.

I don't know about you, but eventually people will run into the pseudo-paradox, whereby they build up £250k in investments (for example) and eventually their mortgage balance organically decreases to the same level... but applying the same logic to not overpay in the first place, means you would not sell off your investments to pay off your mortgage as they should continue to provide a greater return than you pay in interest. So you end up paying your mortgage over it's original term and building up a stonking great savings pot.

That said, at some point we'd cash in and discharge our mortgage before the end of the term. I suspect holidays are probably more enjoyable in our 40's or 50's than in our 70's or 80's.

Yes well in many cases there is a joint mortgage where partners are involved in owning the house and mortgage.  I suspect it's quite rare for both partners to agree that it's better to keep the mortgage open as long as the interest rate is lower than the investment return expected (even more so in the current short term environment when you can make more on secure fixed term savings products at the bank than the mortgage interest rate so you don't even have to take any risk).

I am a case in point - my wife wants to pay off the mortgage even when I try to explain the above, so in the end it will come to a compromise where we will probably pay it off faster than the minimum but at least not until after the current deal is over.

SouthCoastBoy

Also, interest rates have not always been this low, or this low in the future, coupled with the fact there is no guarantee you will have a job in 10 or 20 years time. I paid my mortgage in full as soon as I could, as being the only wage earner in the family, security for my family was my priority. In hindsight, I should have bought a lot larger house and had the mortgage for 20 more years, but I didn't want that debt hanging over me. If there were two high wage earners in the family maybe my decision would have been different

Albermarle

SouthCoastBoy said:

Also, interest rates have not always been this low, or this low in the future, coupled with the fact there is no guarantee you will have a job in 10 or 20 years time. I paid my mortgage in full as soon as I could, as being the only wage earner in the family, security for my family was my priority. In hindsight, I should have bought a lot larger house and had the mortgage for 20 more years, but I didn't want that debt hanging over me. If there were two high wage earners in the family maybe my decision would have been different

Yes, I think that is the critical factor.

The weak spot of the financial rationale of pension before mortgage, is the danger of losing your job.

If there are two earners and/or a very secure job, then probably worth the risk. Otherwise not.

The industry I was in was prone to takeovers and mergers, so I was also happy to get the mortgage paid. Although I was paying into a pension at the same time, and building up some savings, I only really upped the % when I was older.

michaels

We have stoozed our mortgage (moving it to IO) for the last 8 years making 100 plus basis points on the turn using fixed rate mortgage and same duration fixed rate savings to remove any interest rate risk.  WE have also used the funds to move money into pension from the borrowed mortgage money to take full advantage of the tax relief available for doing so.