I think overpaying the mortgage from the get go is worth it for my mental well being.

somerandomusername

My interest rate is 4% fixed for 5 years, it's a 30 year mortgage and a lot can happen in 30 years. 

I work in an industry that is renowned for layoffs, cutting overtime, cutting hours etc. I know full well that I should take the excess money I have and invest it in the stock market but I know I will have constant worry, anxiety and stress hanging over me out of fear that one day I'll lose my job and have difficulty paying the mortgage. 

I'm not a high skilled worker and live in a pretty small city with not all that many jobs that I am qualified to do. 

If I overpay as much as possible without breaching the 20% annual limit, I can reduce the length of the mortgage from 30 years to about 9 years. So yes I would miss out on 9 years of potential stock market growth, but I'd also avoid 20 years of interest payments. 

But after those 9 years, I can go hard as hell on the stock market to make up for the lost 9 years.

Honestly for my own mental wellbeing I really think this is the right decision. What do you guys think? How much value do you put on mental wellbeing when making financial decisions like this?

kimwp

It's not the right thing to put your money into the market, it's a choice. James Shack did an analysis that showed this was only likely to be better if you invested from within your pension (I think that was the specific exemption) - otherwise there were lots of times when you would actually end up.losing money with this approach.

kimwp

https://m.youtube.com/watch?v=9MfCVkRvjQs

kimwp

Make sure you have enough emergency funds in case of job loss and then overpay your mortgage from anything remaining if you can't make more with it using savings accounts. Might you look back and think "could I be in a better position if I had invested?" - possibly yes but also possibly no. I'd have been in a better position because the market did well, but I have no regrets - I was in a really solid position during COVID knowing that I wouldn't lose my house even if I lost my job.

somerandomusername

kimwp said:

Make sure you have enough emergency funds in case of job loss and then overpay your mortgage from anything remaining if you can't make more with it using savings accounts. Might you look back and think "could I be in a better position if I had invested?" - possibly yes but also possibly no. I'd have been in a better position because the market did well, but I have no regrets - I was in a really solid position during COVID knowing that I wouldn't lose my house even if I lost my job.

I know how I think and I know that the relief and peace of being mortgage free just 9 years after taking out the mortgage, would mean so much more to me than thinking "I wish I took the risk and invested, I could have 3x as much money"

The way I see it is if I pay off my mortgage asap there's a 100% chance I will have a roof over my head for life in 9 years time. No matter what happens or how bad things might get, I will have somewhere to live rent / mortgage free. 

El_Torro

I'm not a big fan of paying the mortgage off early, though I do see where you're coming from and don't begrudge people who want to pay it off much sooner rather than later. There are far worse things one could spend money on after all. 

One thing I'll say is that if you have access to a workplace pension then I would at least pay into that. You don't have to go crazy with the amount you put in, but putting in enough to get the maximum contribution from your employer will serve you very well in the future.

Once your mortgage is paid off you can think about your investments more, though I would be in your employer's scheme as a minimum. 

Ksw3

Would a 50:50 approach work? 

beanielou

It has to be what is right for you & for you it sounds like the mortgage. 

somerandomusername

Ksw3 said:

Would a 50:50 approach work? 

Well I'm compensating for not investing into my ISA by doing a good chunk into my work place pension instead, so I'm still "investing" about 22% of my pay check each month. I've just checked the numbers and apparently assuming a 5% real rate of return for stocks, I'd only be approximately £40k worse off over the full 30 year period by paying off the mortgage asap. Of course that figure is entirely dependant on what the market does and interest rates etc.

I think it's because while I'm losing a lot of compound interest growth over those 9 years, I'm also drastically cutting down on the complete loss of money via interest over that period.