Pay off mortgage or Invest

rabbitjuice

Would love your thoughts

This time next year, our ridiculously low 1.7% five year fixed mortgage rate (secured just before the lettuce budget) comes to an end. The mortgage balance is now £100k. We’ve got the £100k in the bank, and have been making our 10% overpayments throughout the term.

I’m wondering if come 2027 should we pay off the mortgage, or get a new rate of probably about 3.5% and use the cash for something else, maybe a property investment or something.

What would you do?

HedgehogRulez

i wouldnt have been making those 10% overpayments throughout the term….

I'd put the 100k into pensions tbh

Powapa

It all depends on what will make you feel more happier in life, when you come to renew your mortgage you will have a significant increase in the monthly cost to what your used to now. People like to pay their mortgage off for financial security and less stress knowing it’s taken care of.

If your happy with the extra monthly cost of the mortgage and want the risk but also possibly bigger reward from investing instead that all depends on your situation. Like hedgehogrulez said you shouldn’t have been making the 10% overpayments as you could have earned more on this money in a savings account and with you making these overpayments it makes me seem to think that paying off the mortgage would be the right thing for you rather than investing as you’ve already lost that gain etc

Archerychick

I would be putting those overpayments into a savings account ready to pay off at the end of your current term.

Whether you pay off the whole thing or invest the £100k ultimately depends on you & what you’d prefer to do. Bear in mind that investing is for the long term 5-10years min, it would be unwise to invest that now to plan to pull it out in a years time.

There is a lot of comfort that comes with having no mortgage, though its likely (not guaranteed) that you’d gain more value by investing those funds instead.

Yorkie1

It seems a very one-sided consideration. Consider how much savings you would have left if you put the £100K into clearing the mortgage. Are there likely to be other projects you want to spend on in the next few years that might need an injection of cash? Large holidays, new car, replacement roof, children at university etc etc. Or upping pension provision, as others have said.

MisterMotivated

I'm in a similar position. My 1.86% 5 year fix ends early next year. I have pretty much every regular saver paying over 5% and will still be able to fund these after clearing the mortgage. I know I'd most likely earn more by investing the money (still have 20+ years left on the term) but right now I prefer the idea of minimising my monthly outgoings and being (non-BTL) mortgage free (the BTL fix ends in 2028 but currently at 4.85% so yet another decision to be made). I'll have to wait and see what the remortgage rate on offer at the time is, but currently the paying off the mortgage option is ahead in the polls.

To complicate things, I don't think of this house as my forever home and like the idea of being able to potentially buy the perfect house if it comes along and then sell this house afterwards, rather than having to rush to get this place ready to sell at the same time