Overpaying Mortgage vs Savings

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  • Gloomendoom
    Gloomendoom Posts: 16,550 Forumite
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    I could have paid off my mortgage several years ago but it's costing me less than I earn in interest on my savings so I will let it run its course.

    I must admit I do get tempted every now and then.
  • dunstonh
    dunstonh Posts: 116,387 Forumite
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    Whilst physiologically clearing the mortgage sounds good, often it is not one of the most efficient uses of your money. A higher rate taxpayer can usually see a much better use of their money (or at least some of it) putting into a pension.

    As it stands, we dont actually know enough about the OP's financial status to make any suggestion on what may be best. So, maybe the OP could give a bit more detail.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Biggus_Dickus
    Biggus_Dickus Posts: 1,636 Forumite
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    edited 13 November 2018 at 12:26PM
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    Thrugelmir wrote: »
    How comfortable are you with a £190k of debt. Would you sleep easier if you owed less. Sometimes peace of mind is better for ones health than chasing a pot of gold at the end of a rainbow.

    An important rule of investing is to only speculate with what you can afford to lose. Markets eventually will bite your fingers off if you aren't carefull. There's no such thing as a free lunch. Like houses. Shares are only worth what somebody else is prepared to pay you for them.
    Vet wrote: »
    I Agree with Thrugelmir. Peace of mind and having property under your belt with no mortgage (or less) must be a nice feeling!
    Notwithstanding the vagaries of stocks/shares/inflation etc,... increasing your monthly mortgage payment (or paying off a lump-sum) gives you immediate and tangible results.

    My daughter has just paid off a chunk of her mortgage and it took her into a more favourable LTV band.

    Although she is actually now paying £17 a month more she has shaved off a full 5-years from the mortgage term length;

    ....sometimes “a bird in the hand is worth two in the bush”,...IMHO. :)
  • Alexland
    Alexland Posts: 9,653 Forumite
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    Yes it usually makes sense if it helps get the best interest rate on the remaining debt such as in your daughter's case but once you own enough of the property that the rate is the best and the repayments are totally affordable then I would rather retire with 2 birds in the pension.

    Alex
  • eskbanker
    eskbanker Posts: 31,076 Forumite
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    Alexland wrote: »
    I would rather retire with 2 birds in the pension
    Sounds like the sort of thing that Hugh Hefner would have said!
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    dunstonh wrote: »
    Whilst physiologically clearing the mortgage sounds good, often it is not one of the most efficient uses of your money.

    Loss of job and relationship breakdown can equally be financially devastating. If you spin a roulette wheel often enough zero will eventually be the result. When making long term decisions personally I believe in degree of caution and balance. Said with hindsight as have this teeshirt amongst my collection. Happens to someone everyday.
  • dunstonh
    dunstonh Posts: 116,387 Forumite
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    Thrugelmir wrote: »
    Loss of job and relationship breakdown can equally be financially devastating. If you spin a roulette wheel often enough zero will eventually be the result. When making long term decisions personally I believe in degree of caution and balance. Said with hindsight as have this teeshirt amongst my collection. Happens to someone everyday.

    Absolutely right. There are many considerations and we are sorely lacking in information to say which is best.

    For many of us, the credit crunch has been a great period with really low-interest rates allowing many of us to be in a position to have surplus funds. Personally, I did a mixture of overpaying the mortgage, increasing the pension and a bit into ISA.

    For me, the best financial option was 100% into pension but I didnt do that because I wanted to lower the mortgage by a certain date. So, the combo method worked best for my scenario.

    We don't know the OP's scenario. Hence why I think we need extra information.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Biggus_Dickus
    Biggus_Dickus Posts: 1,636 Forumite
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    eskbanker wrote: »
    Sounds like the sort of thing that Hugh Hefner would have said!
    Nice one, Centurion. :T
  • Zola.
    Zola. Posts: 2,204 Forumite
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    dunstonh wrote: »
    Absolutely right. There are many considerations and we are sorely lacking in information to say which is best.

    For many of us, the credit crunch has been a great period with really low-interest rates allowing many of us to be in a position to have surplus funds. Personally, I did a mixture of overpaying the mortgage, increasing the pension and a bit into ISA.

    For me, the best financial option was 100% into pension but I didnt do that because I wanted to lower the mortgage by a certain date. So, the combo method worked best for my scenario.

    We don't know the OP's scenario. Hence why I think we need extra information.


    I like a spread of all three too... I put the majority into the market, but about 20% extra will go towards mortgage overpayments. The long term game... the market always goes up in the long run.
  • marco_79
    marco_79 Posts: 237 Forumite
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    I'm in a similar position to the OP and often ponder over this. My mortgage is at 1.89% with 12 years to go, less than 50% LTV. I took out a 5yr fixed and I'm paying enough into a S&S ISA to clear it when the 5yr rate is up. I then have a decision to make to make when the fixed rate ends. My gut tells me to clear the mortgage which I probably will end up doing purely for the accomplishment of being debt free forever (barring any disaster)!!
    Smile and be happy, things can usually get worse!
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