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  • FIRST POST
    • Steve123456789
    • By Steve123456789 15th Oct 19, 3:55 PM
    • 52Posts
    • 16Thanks
    Steve123456789
    What do do when you're mortgage free?
    • #1
    • 15th Oct 19, 3:55 PM
    What do do when you're mortgage free? 15th Oct 19 at 3:55 PM
    I'm sure this has been asked a million times, but I thought I'd ask from my personal perspective. If all goes to plan, I should be mortgage free on a 4 bed house at the age of 32 or 33.


    I'm getting a bit ahead of myself, but what would you do?


    My plan is to either retire early, around 50ish, at the latest hopefully, or go part time as soon as mortgage is done, and work until whenever I need to.
Page 2
    • SouthLondonUser
    • By SouthLondonUser 16th Oct 19, 6:37 PM
    • 1,054 Posts
    • 578 Thanks
    SouthLondonUser
    My mortgage interest rate is 2.02%
    I'll happily sacrifice a small amount of savings interest for the security that comes with owning my whole house.
    Opens up a lot of options in terms of employment (or not)
    Originally posted by Steve123456789
    What do you mean by additional security? Not repaying the mortgage and investing the funds elsewhere may be a bit of a hassle, and of course you need to make sure that tax and mortgage fees do not eat up all the savings from this strategy (many people don't pay taxes on their interest income). But security, what security? As long as you invest in saving accounts backed by the FSCS, and the amounts are < £85k cover, I am not sure what the risks are.

    If instead you want to invest in shares or funds, then, sure, there's the risk those investments will yield less than the mortgage rate.

    You'd be giving up some flexibility, eg if you take out a fixed-rate mortgage you'd pay a penalty for repaying early, so it would be difficult to, say, move elsewhere after one year, but that's flexibility, not security. Also, tracker mortgages do not typically come with early repayment charges.

    Another thing the OP might want to consider is, if he qualifies, an interest-only offset mortgage, like those of First Direct. For example, if I had £100k of savings and a £100k mortgage balance, I wouldn't repay it because I'd want to keep some savings for a rainy day. By offsetting those savings, you'd be paying no mortgage (no interest as the net balance is zero, and no capital as it's interest only), but, at the same time, if you ever need to access those funds (eg the car breaks down) you'd be paying an interest rate that would be higher than the best mortgage but lower than an unsecured loan.
    • SouthLondonUser
    • By SouthLondonUser 16th Oct 19, 6:40 PM
    • 1,054 Posts
    • 578 Thanks
    SouthLondonUser
    I agree. And itís very easy to get more than 2% interest on your money, 3% at least.

    fc
    Originally posted by fewcloudy
    Not if you don't want to take any risks. Investing in the stock market is risky. I am not saying it shouldn't be done, but it's not the same as putting the money in an FSCS-backed saving account.
    • fewcloudy
    • By fewcloudy 16th Oct 19, 7:15 PM
    • 293 Posts
    • 168 Thanks
    fewcloudy
    Not if you don't want to take any risks. Investing in the stock market is risky. I am not saying it shouldn't be done, but it's not the same as putting the money in an FSCS-backed saving account.
    Originally posted by SouthLondonUser

    https://uk.virginmoney.com/savings/products/regular_saver_issue_19

    ...to name but one.

    Iím not arguing with you here, you are entitled to do with your money as you wish. Itís just a response to your original post, an alternative view that makes more of your money. Nothing to do with the stock market.

    This very website explains how to get 5% with M&S for goodness sake!

    https://bank.marksandspencer.com/save-invest/monthly-saver/

    Yes itís a hassle for some, a hobby for others, and the feeling of being mortgage free is surely worth a quid or two... entirely up to you.

    fc
    Feb 2008, 20year lifetime tracker with Sproggit and Sylvester, 0.14% + base for 2 years, then 0.99% + base till end of mortgage...
    • phillw
    • By phillw 16th Oct 19, 7:38 PM
    • 3,079 Posts
    • 2,552 Thanks
    phillw
    I hate working. It's spending all day, 5 days a week working for someone else, who doesn't pay you what you're worth.
    Originally posted by Steve123456789
    You can work for yourself, there are still industries that pay good money.

    You might end up enjoying working.
    • SouthLondonUser
    • By SouthLondonUser 16th Oct 19, 7:42 PM
    • 1,054 Posts
    • 578 Thanks
    SouthLondonUser
    These monthly saver accounts let you invest no more than £250/£300 per month. That's peanuts. It may be worth putting the money there rather than overpaying the mortgage by the same amount.

    But you certainly cannot invest any reasonable amounts, any amounts comparable to that of a mortgage balance, in these regular saver accounts.

    In an earlier post I clearly wrote that you must consider not just the hassle but also taxes and the fixed fees of a mortgage. Spending £500 to remortgage and then investing a significant sum in a saving account at 2% might make sense. But remortgaging to then invest peanuts in a regular saving account wouldn't.
    • fewcloudy
    • By fewcloudy 16th Oct 19, 8:31 PM
    • 293 Posts
    • 168 Thanks
    fewcloudy
    Yes I was only thinking of putting the overpayment money to better use with regular savers, easy to have 3 or 4 on the go and thatís maybe all thatís needed, depends on overpayments.
    If OP sees this as too much hassle for too little reward thatís fair enough, but this is a money saving website to be fair. Very nice to be mortgage free too though, and there is a mortgage-free wannabe board on this website IIRC...
    Feb 2008, 20year lifetime tracker with Sproggit and Sylvester, 0.14% + base for 2 years, then 0.99% + base till end of mortgage...
    • Dorian1958
    • By Dorian1958 16th Oct 19, 11:46 PM
    • 211 Posts
    • 174 Thanks
    Dorian1958
    What costs?
    Originally posted by Steve123456789
    The costs of accommodation, food, travelling etc etc, i. e the costs associated with going to uni outwith the tuition fees, the maximum student loan does not cover all of this.
    • Steve123456789
    • By Steve123456789 17th Oct 19, 8:11 AM
    • 52 Posts
    • 16 Thanks
    Steve123456789
    What do you mean by additional security? Not repaying the mortgage and investing the funds elsewhere may be a bit of a hassle, and of course you need to make sure that tax and mortgage fees do not eat up all the savings from this strategy (many people don't pay taxes on their interest income). But security, what security? As long as you invest in saving accounts backed by the FSCS, and the amounts are < £85k cover, I am not sure what the risks are.

    If instead you want to invest in shares or funds, then, sure, there's the risk those investments will yield less than the mortgage rate.

    You'd be giving up some flexibility, eg if you take out a fixed-rate mortgage you'd pay a penalty for repaying early, so it would be difficult to, say, move elsewhere after one year, but that's flexibility, not security. Also, tracker mortgages do not typically come with early repayment charges.

    Another thing the OP might want to consider is, if he qualifies, an interest-only offset mortgage, like those of First Direct. For example, if I had £100k of savings and a £100k mortgage balance, I wouldn't repay it because I'd want to keep some savings for a rainy day. By offsetting those savings, you'd be paying no mortgage (no interest as the net balance is zero, and no capital as it's interest only), but, at the same time, if you ever need to access those funds (eg the car breaks down) you'd be paying an interest rate that would be higher than the best mortgage but lower than an unsecured loan.
    Originally posted by SouthLondonUser

    The additional security of owning your whole house. No one can take it away from you. There are no mortgage payments to miss. I'd definitely sacrifice an extra 1% interest to have paid off my entire house.
    • Steve123456789
    • By Steve123456789 17th Oct 19, 8:16 AM
    • 52 Posts
    • 16 Thanks
    Steve123456789
    You can work for yourself, there are still industries that pay good money.

    You might end up enjoying working.
    Originally posted by phillw

    I don't think I want to enjoy working though. Sounds weird, but I like that I hate working.


    I look around at people who just sit and stare at their screen all day, and are content. I don't want to be content doing that. It's not right. But I'm the strange one, because I want to change.


    It makes me appreciate my free time, and know that I want more of it.
    • Steve123456789
    • By Steve123456789 17th Oct 19, 8:22 AM
    • 52 Posts
    • 16 Thanks
    Steve123456789
    Yes I was only thinking of putting the overpayment money to better use with regular savers, easy to have 3 or 4 on the go and thatís maybe all thatís needed, depends on overpayments.
    If OP sees this as too much hassle for too little reward thatís fair enough, but this is a money saving website to be fair. Very nice to be mortgage free too though, and there is a mortgage-free wannabe board on this website IIRC...
    Originally posted by fewcloudy

    I'm all up for the hassle of this. Before we bought our house, we had 19 bank accounts between us, and a huge bunch of standing orders throughout the month, moving money around.


    e.g we had 3 Nationwide accounts which paid 5% on £2500, but you had to pay £1000 in from another bank's account, so after pay day, £1000 S/O would go to one account, then back to my main current account, then to the next Nationwide, then back etc etc.
    Then we'd have various S/Os set up going into savings accounts and other current accounts like above.


    We were making about £220 a month in interest.
    • AnotherJoe
    • By AnotherJoe 17th Oct 19, 8:37 AM
    • 16,225 Posts
    • 19,458 Thanks
    AnotherJoe
    I'm investing in a S&S ISA with Vanguard. I started last month and it's lost 2% of its value already..
    Originally posted by Steve123456789
    That's good, what want when you start investing is low prices not high, the lower they stay the better, you have decades to invest over the lower prices are at the start the more you are buying and the more you will eventually get back when the market rises. That is as long as you are investing in index funds, or you know exactly what the actively managed investment is doing so you don't get in a "Woodford situation".

    The reason I'm considering part time work ASAP is that I hate work more than I can describe with words.
    Originally posted by Steve123456789
    Then start looking for one you like.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • Steve123456789
    • By Steve123456789 17th Oct 19, 9:07 AM
    • 52 Posts
    • 16 Thanks
    Steve123456789
    Then start looking for one you like.
    Originally posted by AnotherJoe

    I hate work. Not just my job.
    • SouthLondonUser
    • By SouthLondonUser 17th Oct 19, 11:49 AM
    • 1,054 Posts
    • 578 Thanks
    SouthLondonUser
    The additional security of owning your whole house. No one can take it away from you. There are no mortgage payments to miss. I'd definitely sacrifice an extra 1% interest to have paid off my entire house.
    Originally posted by Steve123456789
    Again, I don't understand. We were talking about the merits of repaying the mortgage vs investing the money elsewhere. If you have a £100k mortgage charging 1.3% but also have £120k in saving accounts yielding more, how is that less secure than having zero mortgage and £20k savings? Hassle and flexibility are one thing (as discussed), but security??
    • 20SmthngSver
    • By 20SmthngSver 17th Oct 19, 12:10 PM
    • 367 Posts
    • 118 Thanks
    20SmthngSver
    I'm sure this has been asked a million times, but I thought I'd ask from my personal perspective. If all goes to plan, I should be mortgage free on a 4 bed house at the age of 32 or 33.


    I'm getting a bit ahead of myself, but what would you do?


    My plan is to either retire early, around 50ish, at the latest hopefully, or go part time as soon as mortgage is done, and work until whenever I need to.
    Originally posted by Steve123456789
    A 4 bed house where in the country though? Completely dictates the size of your mortgage and how you could possibly be mortgage free by 32 (what age are you now?) Bedrooms is irrelevant in this, a two bed house 2 hours away could be mortgaged for as much or more.

    Seems a bit odd to talk about a hypothetical for in 20+ years time, but if you think with how the cost of living is going already and in the past decade that you'll be able to retire at 50 and if in good health feasibly live up to 100 years old, meaning 50 years not working (maybe 20 years part time) then you can think again lol. How will you fund food, council tax, electricity, gas, fuels, media and comms charges, holidays, repairs for up to 50 years on a pension and savings if it's not making anything?
    • Steve123456789
    • By Steve123456789 17th Oct 19, 1:54 PM
    • 52 Posts
    • 16 Thanks
    Steve123456789
    A 4 bed house where in the country though? Completely dictates the size of your mortgage and how you could possibly be mortgage free by 32 (what age are you now?) Bedrooms is irrelevant in this, a two bed house 2 hours away could be mortgaged for as much or more.

    Seems a bit odd to talk about a hypothetical for in 20+ years time, but if you think with how the cost of living is going already and in the past decade that you'll be able to retire at 50 and if in good health feasibly live up to 100 years old, meaning 50 years not working (maybe 20 years part time) then you can think again lol. How will you fund food, council tax, electricity, gas, fuels, media and comms charges, holidays, repairs for up to 50 years on a pension and savings if it's not making anything?
    Originally posted by 20SmthngSver

    What you've just said is that I shouldn't bother thinking about retirement because I'm young, and that I won't be able to retire at 50 anyway.


    I'd happily work part time for much longer than that, from as soon as I pay off my mortgage.
    • 20SmthngSver
    • By 20SmthngSver 18th Oct 19, 9:38 AM
    • 367 Posts
    • 118 Thanks
    20SmthngSver
    I didn't say that at all and that's not true. I'm young, and I've thought about financial preparations for retirement, such as paying into a private pension which I do.

    But you're really getting ahead of yourself and not thinking about what's going on now which will affect you in 30 to 40 to even 70 years time. That is of course assuming you live a long life.

    If you was mortgage free now, could you afford to work part time? If no, then how could you in 20-40 years? The cost of living is only going up, wages aren't at the same rate. You didn't answer how you'd pay for all of the basic and compulsory day to day and week to week things I listed. If you want to retire at 50 that's fine if you can, but what are you going to do everyday until you're 90 or 100? What if something goes wrong and you end up with no money at 55? You won't get your state pension until probably 70 by the time we reach that age. Have you worked out what your monthly outgoings are now plus contingency? You'll need a lot more of it in 40 years the way it's going.

    I think you need to be thinking more realistically and in here and now, then the future will look after itself.
    Last edited by 20SmthngSver; 18-10-2019 at 11:41 AM. Reason: typo
    • seanh95
    • By seanh95 18th Oct 19, 11:24 AM
    • 6 Posts
    • 1 Thanks
    seanh95
    Well said. Personally think if you dont like your job find your passion and you will love work. All good and well being mortgage free but will that easy life really help you grow etc?

    What will you do with your time, goals etc?
    • 20SmthngSver
    • By 20SmthngSver 18th Oct 19, 11:39 AM
    • 367 Posts
    • 118 Thanks
    20SmthngSver
    I'm young but I'm extrmemely offended by the tarring of the term millenial. Please do smear all of us like that!
    • MizzPenniless
    • By MizzPenniless 19th Oct 19, 12:20 AM
    • 17 Posts
    • 13 Thanks
    MizzPenniless
    The reason I'm considering part time work ASAP is that I hate work more than I can describe with words.
    Originally posted by Steve123456789
    My sentiments exactly. I left my job 2 months ago, with the idea of temping and travelling when I'm not working. So far I've done no travelling, but I am starting a 4 week temp job on Monday and am dreading it. It is amazing how quickly you adapt to not working and having your days to yourself to do as you please.
    • Steve123456789
    • By Steve123456789 21st Oct 19, 8:21 AM
    • 52 Posts
    • 16 Thanks
    Steve123456789
    I didn't say that at all and that's not true. I'm young, and I've thought about financial preparations for retirement, such as paying into a private pension which I do.

    But you're really getting ahead of yourself and not thinking about what's going on now which will affect you in 30 to 40 to even 70 years time. That is of course assuming you live a long life.

    If you was mortgage free now, could you afford to work part time? If no, then how could you in 20-40 years? The cost of living is only going up, wages aren't at the same rate. You didn't answer how you'd pay for all of the basic and compulsory day to day and week to week things I listed. If you want to retire at 50 that's fine if you can, but what are you going to do everyday until you're 90 or 100? What if something goes wrong and you end up with no money at 55? You won't get your state pension until probably 70 by the time we reach that age. Have you worked out what your monthly outgoings are now plus contingency? You'll need a lot more of it in 40 years the way it's going.

    I think you need to be thinking more realistically and in here and now, then the future will look after itself.
    Originally posted by 20SmthngSver

    Yes, easily. On a month where we don't overpay, our outgoings as a couple would halve. On a month where we make an overpayment, they'd more than half. In this year, my entire take-home salary, plus a bit of hers went on the mortgage, and we've still saved money. With no mortgage, I could completely quit work, we could live off my wife's salary, and we'd still be better off than we are now. Obviously one of us won't quit work while the other works part time though.


    Yes. I've been filling in a spreadsheet of spending for years and know how much I spend on pretty much everything. As above, with no mortgage we could live off part time jobs.


    I wasn't asking for advice, more just querying what people do.


    Not wanting to work isn't lazy, it's sensible.
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