Does being a MFW currently make sense?

My wife and I are 2.5 years into our 30 year mortgage and have ~£91k left to go with the house worth ~£200k. We had always talked about paying down the mortgage as fast as we could to reduce the interest but haven't been in a position to do so. However, she has a sharesave about to end and a new job so we've started discussing it again. She can pay the allowed 10% this year from her sharesave and we could up our monthly payments next year to really speed up the end date, but I'm now wondering if that's the best thing to do.

I can't help feeling that with inflation higher than our mortgage rate (2.39% for another 2.5 years) it doesn't make financial sense to pay it off any faster than we have to. Should we be using high interest current accounts, regular savers and putting money into our pensions instead? Does the mental relief of being mortgage free trump the financial side of it?
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  • daisy_1571
    daisy_1571 Posts: 1,161
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    edited 13 March 2018 at 8:42AM
    That very much depends on your own views. Not every decision makes technical financial sense ie the snowball method of paying off multiple debts where it would make financial sense to pay off highest interest first but it often makes psychological sense to concentrate and pay off smallest balance first and get rid of one debt completely.

    If you are unsure then try allocating 50% of the spare money to mortgage balance and 50% to saving into isa, pension or wherever then you will feel you are getting ahead on both fronts. Percentages can change as your attitude changes over the years.

    Inflation, savings interest rates, future pension schemes all have an element of not being sure how they will stand in 10 years. Lots of people prioritise mortgage simply as it is a very definite amount that you currently owe and you will owe in 10 years along with definitely needing somewhere to live.

    Good luck with your pondering (but do *something* rather than ponder too long and 'waste' years trying to find the *perfect* plan)

    Daisy
    2022: 3🏅 4⭐ 2023: 5🎖🏅🏅 🎖🏅6 ⭐⭐ ⭐ ⭐ ⭐ ⭐ ⭐ ⭐ Never save something for a special occasion. Every day in your life is a special occasion. Take hold of every moment - anon I'm a clutterbug butterfly 🦋 The difference between what you were yesterday and what you will be tomorrow is what you do today Well organised clutter is still clutter - Joshua Becker If you aren't already using something in your home, you won't start using it more by shoving it in a cupboard- AJMoney
  • MM10
    MM10 Posts: 57
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    There is a lot of uncertainty in forecasts .....but your decision is personal as it depends on your risk tolerance.....
    I personally do not wish to leverage my mortgage even though it is possible to get s higher return on the market
    Total mortgage when started £256,809 in May of 2011; 2018 MFW #5
    Main mortgage was £214,309; now [STRIKE] £110,716 at Feb 2016 [/STRIKE]; [STRIKE] £63,645 at Feb 2017 [/STRIKE]; [STRIKE]£10,600 at May 2018[/STRIKE]
    Original repayment date 2036; Main mortgage free date [STRIKE]July 2021[/STRIKE]; [STRIKE]Dec 2020[/STRIKE]; [STRIKE]January 2019[/STRIKE] June 2018:)
  • Lungboy
    Lungboy Posts: 1,953
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    Thanks both. It's not really about getting a higher return on the market, but if inflation being higher than my mortgage rate, and possibly getting higher again, then it becomes less and less attractive to pay it down any faster than necessary.
  • daisy_1571
    daisy_1571 Posts: 1,161
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    I'm not sure I get what you mean LB, if your outlook is that inflation is high and getting higher then the stuff you buy every week eg fuel, food etc costs more and takes a bigger percentage of your salary. Being in a situation where you don't have the large outlay of the mortgage means more freed up salary each month. Plus the security of knowing you won't ever go into arrears and have your home repossessed.

    Maybe I am misunderstanding your terminology but it's a personal decision what you concentrate on, unfortunately each pound can only be spent once so everyone has their own priority

    Daisy
    2022: 3🏅 4⭐ 2023: 5🎖🏅🏅 🎖🏅6 ⭐⭐ ⭐ ⭐ ⭐ ⭐ ⭐ ⭐ Never save something for a special occasion. Every day in your life is a special occasion. Take hold of every moment - anon I'm a clutterbug butterfly 🦋 The difference between what you were yesterday and what you will be tomorrow is what you do today Well organised clutter is still clutter - Joshua Becker If you aren't already using something in your home, you won't start using it more by shoving it in a cupboard- AJMoney
  • ZTD
    ZTD Posts: 24,327 Forumite
    Lungboy wrote: »
    Thanks both. It's not really about getting a higher return on the market, but if inflation being higher than my mortgage rate, and possibly getting higher again, then it becomes less and less attractive to pay it down any faster than necessary.

    It doesn't matter if inflation is higher than your mortgage rate, only that if possible saving rates are higher than your mortgage rate. As inflation erodes your mortgage, it also erodes your savings.

    Unless of course, you're thinking of not paying off your mortgage early and spending all you earn.

    In that particular case, you also need to assign a monetary value to risk. Or risk mitigation in the case of paying off your mortgage.
    "Follow the money!" - Deepthroat (AKA William Mark Felt Sr - Associate Director of the FBI)
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  • Butti
    Butti Posts: 5,014
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    Paying off more than you need to buys you options if anything goes wrong. The bank see you as less of a risk and overpaying gives you flexibility were your circumstances to change.
    Debt LBM (08/09) £11,641. DEBT FREE APRIL 2021.
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  • OnlyGuyWhoLikesTwix
    OnlyGuyWhoLikesTwix Posts: 37
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    edited 14 March 2018 at 8:37AM
    It is dependent on your circumstances and - without sounding like a doomster - what happens should you and your other half split up. These are all things to take into consideration. For example if one person overpays significantly more than the other, things could be messy in the event of a separation.

    But for myself, six months ago I was still paying down credit card debt. So overpaying made no sense as a good £400 of my paycheck was disappearing into credit card interest. It's a nasty cycle. But I'm out of it now. And ironically the second I'm out of it, that's where I get a little bit of a windfall.

    I am most certainly overpaying. Simply as I earn enough to do so, am a single person living alone and everything I pay in helps in a big way! I have the important things covered which is I have no more interest bearing debt, I have taken some money to do a few minor house repairs and I have enough in the bank to cover a few storms. So if I lose my job or the roof blows off, there is enough there to cover me for at least 1.5 tragedies.

    The amount I am overpaying, I'm likely to be mortgage free in 9 years (instead of my original 7 but I was misled by the stupid MSE Calculator). But two extra years won't hurt and I'm still only just into my 40s at that stage. So I can still follow a few life-dreams I have in mind at that age which I really can't right now.

    I would say if you can say to yourself, "I'm covered for a couple of tragedies" and can leave money somewhere to cover it, throw everything you can at it!

    EDIT:
    Though I do see what you mean; At the moment, London Capital are offering an 8% £5,000 minimum ISA over 3 years. For me my interest rate is 2.39% so wondering if I may be better off doing that myself...

    EDIT 2:
    OK you have me thinking now! Thanks for this post!
    Mortgage when started: £186500 (2 year fixed when taken out in 2016)
    Current mortgage (13/03/2018): £146,922.15 (5yr fixed 2.39% + 10% overpayment limit)
    Mortgage free day: 0?/0?/2025
  • Lungboy
    Lungboy Posts: 1,953
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    I suggest you read the London Capital threads in the savings forum before you go anywhere near them. It's NOT an 8% ISA. At all.
  • getmore4less
    getmore4less Posts: 46,882
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    Does being a MFW currently make sense?

    always.

    Remember it is not just about putting money into the mortgage pot.

    MFW is about the net position with resources that are allocated to that task.

    think offset mortgage once you are 100% offset you are effectively mortgage free, it does not matter where the money is, offset, savings, another property, pension lump sum,...

    when the net position is possitive against the morgtgage debt you are a MF[STRIKE]W[/STRIKE]
  • MM10
    MM10 Posts: 57
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    think offset mortgage once you are 100% offset you are effectively mortgage free, it does not matter where the money is, offset, savings, another property, pension lump sum,...

    when the net position is positive against the morgtgage debt you are a MF[STRIKE]W[/STRIKE]

    Your statement certainly makes a great point. Thanks for sharing :)
    Total mortgage when started £256,809 in May of 2011; 2018 MFW #5
    Main mortgage was £214,309; now [STRIKE] £110,716 at Feb 2016 [/STRIKE]; [STRIKE] £63,645 at Feb 2017 [/STRIKE]; [STRIKE]£10,600 at May 2018[/STRIKE]
    Original repayment date 2036; Main mortgage free date [STRIKE]July 2021[/STRIKE]; [STRIKE]Dec 2020[/STRIKE]; [STRIKE]January 2019[/STRIKE] June 2018:)
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