| Would you pay off your mortgage? 10:28 - Sep 27 with 5609 views | RobTheMonk |
We have about £155,000 left on our mortgage. Fixed for another 2 years at 1.69% (initially was a 5 year fixed, so we've been quite lucky with how things are gone).
In 2 years it will be around £134,000.
Hypothetically, if you could, would you pay it off when the fixed rate ends and pay the early settlement fee? With the big price hikes, could it actually be more financially viable to do this? There's also the psychological boost of not having a mortgage.
Obviously things will change over two years so take the above on face value of current conditions.
Edit - None of what is said in this thread is financial advise and everything discussed is purely hypothetical.
[Post edited 27 Sep 2022 11:05]
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| Would you pay off your mortgage? on 10:30 - Sep 27 with 4925 views | ElderGrizzly |
When the fixed rate ends, there won't be any early settlement fee.
Of course if you have £134k to pay it off in it's entirety, if a fee did exist it wouldn't be an issue for you :) |  | | |
| Would you pay off your mortgage? on 10:32 - Sep 27 with 4908 views | bluefunk |
What’s the other options? |  | | |
| Would you pay off your mortgage? on 10:33 - Sep 27 with 4904 views | RobTheMonk |
| Would you pay off your mortgage? on 10:32 - Sep 27 by bluefunk |
What’s the other options? |
- Invest it and hope for higher returns.
- New fixed rate at what will most probably be much higher than what we have. | | | |
| Would you pay off your mortgage? on 10:34 - Sep 27 with 4891 views | Sikamikanico |
I'm sure the settlement fee would only be if you tried to repay it all during the 2 years.
If you have cash and it wouldn't leave you short of funds in case of any emergencies that would then require more expensive borrowing then it isn't the worst idea in the world. |  | | |
| Would you pay off your mortgage? on 10:37 - Sep 27 with 4869 views | homer_123 |
If interests rates are very low and, therefore borrowing is 'relatively' cheap - then if you can invest and gain returns above the rate you are repaying, you'd invest.
Right now, though, it's a judgement call.
If rates spiral - then paying off your mortgage (or even a large chunk) would possibly be a better option.
You also, though, need to factor in cost of living, inflation etc in terms of your day to day living and what you may need in terms of ready cash to pay increasing bills in the short term.
For me, personally, rates are only likely to increase [Post edited 27 Sep 2022 10:47]
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| Would you pay off your mortgage? on 10:45 - Sep 27 with 4812 views | RobTheMonk |
| Would you pay off your mortgage? on 10:30 - Sep 27 by ElderGrizzly |
When the fixed rate ends, there won't be any early settlement fee.
Of course if you have £134k to pay it off in it's entirety, if a fee did exist it wouldn't be an issue for you :) |
Wish we did! 2 years to earn some more pennies! | | | |
| Would you pay off your mortgage? on 10:46 - Sep 27 with 4808 views | Churchman |
Surely, when the FR ends there won’t be an early settlement fee will there? Other than any nominal fee to pay the mortgage off of course. Personally I would, but it would depend on what the early settlement fee is.
In answer to your question, in principle yes. As a rule I’ve always taken the view that if it costs more to borrow than you can earn in savings (which it usually does), it’s best to get rid of the debt. This is definitely the case for unsecured loans, credit cards etc.
The other factor is that as a rule one needs £ for every day, living, hols etc so that needs to be taken into account if you repay a mortgage. You have to live - I raised an eyebrow when my parents left themselves asset rich and cash poor then spent years moaning about lack of money. When I paid my mortgage off, it was nothing psychological for me. It was purely a logical thing with the money to do it - but some people do feel that way.
These are very much personal views and how you feel about it in yourself is all that matters. Given you have two years before the FR I’d wait and see how the land lies six months before it expires, do the numbers and decide then. |  | | |
| Would you pay off your mortgage? on 10:49 - Sep 27 with 4788 views | WeWereZombies |
As others have said earlier in this thread, if you can pay off the mortgage and live your life unencumbered by debt my advice would be to do so. The relief from that mental pressure at least is a big health boost. The other incentive is that it also frees up time (although as Homer_123 alluded to, if that just stops you working your remaining funds so much then you could also see that as a negative.) When i was shot of the mortgage game twenty years ago and I had no idea where I wanted to live and what I wanted to do I was more than happy to rent for the next few years, just because of the freedom of choice it afforded me. But it does depend on your assets, I might have gone back to borrowing to buy a place to live if I had not had an investment that way outperformed my expectations. [Post edited 27 Sep 2022 11:10]
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| Would you pay off your mortgage? on 10:52 - Sep 27 with 4761 views | ArnoldMoorhen |
I am not a Financial Advisor and this is not Financial Advice.
I would pay it off. You then have a financial security that many could only dream of. Investing that sort of money over the next few years in the hope of beating interest rates is a gamble. Historically a winning gamble most of the time, but it only takes one crash and you could see huge losses. And I would say a huge crash is more likely than not in the next 5 years.
Put it this way: are you confident enough in your ability to beat the interest rates and invest brilliantly, that you would sell your house, invest it all, and rent?
I would guess not, so then it is about your appetite for risk.
You could pay off anything between £50,000 and £100,000, take out a relatively small mortgage over a short period, and invest the rest. Your monthly mortgage payments would come right down, but if the challenge of "trying to beat the market", or feeling that you didn't lose out, is important to you then it gives you a way to go with that psychological drive to precisely the level of risk you are comfortable with.
Whatever you decide to do, you are in a very fortunate position. | | | |
| Would you pay off your mortgage? on 10:54 - Sep 27 with 4744 views | Swansea_Blue |
100%, but I wouldn't wait. If I had the cash, I'd bail now and pay the settlement fee, as it's likely to be less than the interest over the remaining term (although you'd check that first of course).
Paying off a mortgage is pretty much always seen as the most money efficient thing you can do, and will be more so as interest rates rise. |  |
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| Would you pay off your mortgage? on 10:55 - Sep 27 with 4743 views | blue62 |
I think if I was in the situation where I had the £150k I think I would invest it in a Buy to let property and then use the income from that to pay some or all of my mortgage. You would probably get £700 per month from that and still have an asset to sell at a later date. |  | | |
| Would you pay off your mortgage? on 11:03 - Sep 27 with 4688 views | bluefunk |
| Would you pay off your mortgage? on 10:33 - Sep 27 by RobTheMonk |
- Invest it and hope for higher returns.
- New fixed rate at what will most probably be much higher than what we have. |
Then if you have the funds pay off your mortgage. Investing involves risk on both the investment and in the potential for an further increase in interest rates, against the certainty of being debt free on your main residence.
You still have the option later on to remortgage and use the saved mortgage payments to drip feed an investment to benefit from pound cost averaging
This is, of course, not regulated advice | | | |
| Would you pay off your mortgage? on 11:03 - Sep 27 with 4686 views | homer_123 |
| Would you pay off your mortgage? on 10:54 - Sep 27 by Swansea_Blue |
100%, but I wouldn't wait. If I had the cash, I'd bail now and pay the settlement fee, as it's likely to be less than the interest over the remaining term (although you'd check that first of course).
Paying off a mortgage is pretty much always seen as the most money efficient thing you can do, and will be more so as interest rates rise. |
Whilst no financial adviser - over the last few years, as rates have been so low - paying off a mortgage during this period isn't always the best option.
The key thing, as one or two others have said, is what you want. If you want to be 'debt' free and not have a mortgage hanging over you - then clear it or as much of it as you can, def the case. | |
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| Would you pay off your mortgage? on 11:05 - Sep 27 with 4677 views | bluelagos |
My view would be to clear the mortgage if you can. The alternative is to invest and thus gamble you can get a higher return than the interest on the mortgage.
You might, you might not. But pay off the mortgage and you now have real options. Like a change of career? Or a career break? Or reduce the number of days you work?
The alternative is to continue borrowing and paying interest to a bank/building society in the hope you can get some jam tomorrow. If you are lucky enough to be in that position, grab it with both hands would be my view.
*Like AM, mine is not financial advice. Just life advice really. [Post edited 27 Sep 2022 11:47]
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| Would you pay off your mortgage? on 11:44 - Sep 27 with 4567 views | itfcjoe |
At those interest rates then absolutely no point - if you have the cash keep a chunk in case things get worse and stick the rest in a high interest account (of which there will have to be lots now) and wait until your rate is reassessed at end of term |  |
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| Would you pay off your mortgage? on 13:00 - Sep 27 with 4336 views | ElephantintheRoom |
One sensible option now is to overpay if you can afford it as rates will never be this low again.
As to paying it off it entirely depends what spare cash you have and how much tax you pay - and how old you are. You can get tax relief on a self invested pension and perhaps earn far more with that money in the long term - or buy a classic car and enjoy some enjoyable posing whilst it appreciates tax-free faster than your house.
Despite all the hype about mortgage interest rates they are still quite low and aren’t going up to 10% any time soon. | |
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| Would you pay off your mortgage? on 14:18 - Sep 27 with 4188 views | Daninthecampo |
I am a financial adviser but without knowing your overall situation this isn't advice! but i would certainly consider:
If you have the money to pay to off it of in 2 years, this implies you have a fair sum now, with inflation at around 8-9% if this money is sitting in a bank account you're losing 8-9% per year, you can obviously invest the money, but currently with the markets where they are and how low they could still go, unless you want to invest in higher risk funds, Green energy etc, your return is still unlikely to cover the inflation for the next 2 years.
Your mortgage lender will likely allow you to overpay your mortgage by 10% per year without penalty. I would certainly look at maximising this, then in 2 years you will owe less so the increased rates will have a smaller effect. Or you can just pay off the full mortgage. But this leaves you open to options in 2 years time | | | |
| Would you pay off your mortgage? on 14:29 - Sep 27 with 4150 views | Pinewoodblue |
| Would you pay off your mortgage? on 14:18 - Sep 27 by Daninthecampo |
I am a financial adviser but without knowing your overall situation this isn't advice! but i would certainly consider:
If you have the money to pay to off it of in 2 years, this implies you have a fair sum now, with inflation at around 8-9% if this money is sitting in a bank account you're losing 8-9% per year, you can obviously invest the money, but currently with the markets where they are and how low they could still go, unless you want to invest in higher risk funds, Green energy etc, your return is still unlikely to cover the inflation for the next 2 years.
Your mortgage lender will likely allow you to overpay your mortgage by 10% per year without penalty. I would certainly look at maximising this, then in 2 years you will owe less so the increased rates will have a smaller effect. Or you can just pay off the full mortgage. But this leaves you open to options in 2 years time |
All I would add is if your lender doesn’t allow over payments, or only once a year, put extra money aside with the intention of reducing the size of your next mortgage. |  |
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| Would you pay off your mortgage? on 14:37 - Sep 27 with 4092 views | RobTheMonk |
| Would you pay off your mortgage? on 14:18 - Sep 27 by Daninthecampo |
I am a financial adviser but without knowing your overall situation this isn't advice! but i would certainly consider:
If you have the money to pay to off it of in 2 years, this implies you have a fair sum now, with inflation at around 8-9% if this money is sitting in a bank account you're losing 8-9% per year, you can obviously invest the money, but currently with the markets where they are and how low they could still go, unless you want to invest in higher risk funds, Green energy etc, your return is still unlikely to cover the inflation for the next 2 years.
Your mortgage lender will likely allow you to overpay your mortgage by 10% per year without penalty. I would certainly look at maximising this, then in 2 years you will owe less so the increased rates will have a smaller effect. Or you can just pay off the full mortgage. But this leaves you open to options in 2 years time |
Thanks, yes, 10% is what we can overpay (which we've chipped away at and have knocked off about £70 off the monthly amount). We've carried on paying £900 though so are in essence overpaying a little each month.
We don't have the 134k at the moment. Mum is looking to sell her house in a desirable Cotswold location, downsize and give some to my sister and I (another can of worms, I know), so all hypotheticals at the moment. Madge and I both work and other than her student debt we're all good (although we do have the twins to worry about now too!).
I think we'll ultimately see a financial adviser but always good to hear thoughts from the TWTD thinktank. | | | |
| Would you pay off your mortgage? on 14:54 - Sep 27 with 4011 views | mutters |
No. If you mortgage rate is 1.69 then you can earn a higher interest rate for your money. Savings accounts are floating around 3% so it make sense to let it play out and then pay a lump sum when the fixed deal expires. |  |
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| Would you pay off your mortgage? on 18:05 - Sep 27 with 3778 views | Deano69 |
Very much depends on the income the spare £134k is bringing you in. If its earning 0.5% in a bank account, then yes, if its earning 12% in a buoyant pension fund then no. |  |
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| Would you pay off your mortgage? on 18:53 - Sep 27 with 3702 views | SmithersJones |
Again, usual qualifications about me not being a financial advisor etc and what I say may be totally wrong for your situation.
Have you considered an offset mortgage? If you have the £134k spare but think you might need access to it then you can in effect put it in a savings account with the same bank that you have your mortgage with. As long as your savings exceed the outstanding loan you pay no interest. If you needed access to the cash then you can get it, without the aggro of remortgaging. | | | |
| Would you pay off your mortgage? on 19:24 - Sep 27 with 3632 views | eireblue |
| Would you pay off your mortgage? on 14:37 - Sep 27 by RobTheMonk |
Thanks, yes, 10% is what we can overpay (which we've chipped away at and have knocked off about £70 off the monthly amount). We've carried on paying £900 though so are in essence overpaying a little each month.
We don't have the 134k at the moment. Mum is looking to sell her house in a desirable Cotswold location, downsize and give some to my sister and I (another can of worms, I know), so all hypotheticals at the moment. Madge and I both work and other than her student debt we're all good (although we do have the twins to worry about now too!).
I think we'll ultimately see a financial adviser but always good to hear thoughts from the TWTD thinktank. |
It is worth thinking about the difference between the options vs risk vs certainty.
I don’t know (code for, can’t be asked to do the sums, I am more pure than applied maths), what the difference is for instance in the gain you would get, if for instance you took that money and popped it into a savings account.
E.g. what is the difference in paying interest at 1.7% and saving at 3%, over two years.
A lot of things can happen in two years.
Is it the financial gain to you over two years, worth the certainty of paying off a mortgage now.
That’s my x cents worth of advice, where x is a arbitrarily applied nominal non-negative integer. |  | | |
| Would you pay off your mortgage? on 19:39 - Sep 27 with 3587 views | jas0999 |
Absolutely. If you can afford it, pay off the mortgage, unless it’s a 0%interest loan it makes complete sense. | | | |
| Would you pay off your mortgage? on 20:40 - Sep 27 with 3463 views | Kropotkin123 |
| Would you pay off your mortgage? on 10:33 - Sep 27 by RobTheMonk |
- Invest it and hope for higher returns.
- New fixed rate at what will most probably be much higher than what we have. |
Hypothetically, if I was in a position to pay off a mortgage, I'd do so if the interest rates were above 4%. If they were below 4% I would invest the money and hope for higher returns. |  |
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