Mortgages - would you pay it all off if you could?

LionAquaLooper · September 2023

For those who have a mortgage - if you had the means to pay off your mortgage now, would there be any reason NOT to?

My wife and I are in a position where, at a stretch, we could pay our mortgage off completely. I'm no expert on mortgages but it seems like a no-brainer. Only thing that concerns me is I think our credit scores will drop and if we want to move house one day and borrow again, that might affect how much we can borrow? Our current mortgage rate is also still pre-interest rise but due to expire in a couple of years so the annual interest we pay isn't so bad yet, but it's still interest paid.

Are there any other downsides to repaying early that I'm not seeing?

stickyfiddle · September 2023

What rate are you on?

Chances are if you're on a pre-2022 rate you can get a fixed deposit investment for a year or 2 at a much higher rate and make some money. e.g. Lloyds currently gives a 12m fixed rate of 5.5% for anything over 10k

Assuming a 100k balance on 2% mortgage you'd pay 2k in interest* and could receive 5.5k back, so you're up 3.5k for almost no effort. Rates will probably still be high in a year's time when that finishes, so you could do it again. Obviously that money is tied up for the fixed period, but if it goes into your mortgage it's tied up as well.

Obviously what that doesn't give you is the peace of mind of being debt-free, which is a powerful thing. I won't try and tell which is more important to you

* not exactly as balance would decrease over the year, but my point is roughly right.

CavemanGrogg · September 2023

Yes, even if for no other reason than peace of mind and not having to think about it again.

Sporky · September 2023

What Sticky said Re investing vs paying off.

On credit score, I've twice paid off mortgages, now mortgage free, and my Experian is 999.

octatonic · September 2023

Also don't have a mortgage and have a good credit rating.
Paying it off was one of the best days of my life.

stufisher · September 2023

Think long term, especially given the last decade or so of financial/economic turmoil and uncertainty.

Noone really knows what will happen in the (near) future but being debt-free is liberating. Our challenges are nothing compared to those of our children and their children ... being able to help them best we can in their times of need is an important consideration IMHO.

We were fortunate to be able to pay off our mortgage early and, with hindsight, it was the smartest thing we've done because our quality of life overall improved significantly.

Sporky · September 2023

Oops. Wrong thread!

CHRISB50 · September 2023

I would pay it off in a heartbeat, if I had the means to do so.

Peace of mind, and it’s my biggest outgoing per month.

Which means more money for coke and hookers. YMMV.

fretmeister · September 2023

Pay it off.

Then do not go mad with the spare monthly income, you do not need a nightly Curry delivery *. Instead, put that into savings until you decide what to do next.

* Unless you really love Curry like I do.

Haych · September 2023

In less than a heartbeat!

Snap · September 2023

@stickyfiddle has it right for me - if you can make the money earn more than it costs to borrow, then invest is the way to go. However, today, when rates are so high (vs previous) then it makes sense to pay off.

strumjoughlamps · September 2023

Paid mortgage off 2 weeks before my 40th Birthday, that was over 11 years ago now.

BEST THING EVER....

LionAquaLooper · September 2023

stickyfiddle said:

What rate are you on?

Chances are if you're on a pre-2022 rate you can get a fixed deposit investment for a year or 2 at a much higher rate and make some money. e.g. Lloyds currently gives a 12m fixed rate of 5.5% for anything over 10k

Assuming a 100k balance on 2% mortgage you'd pay 2k in interest* and could receive 5.5k back, so you're up 3.5k for almost no effort. Rates will probably still be high in a year's time when that finishes, so you could do it again. Obviously that money is tied up for the fixed period, but if it goes into your mortgage it's tied up as well.

Obviously what that doesn't give you is the peace of mind of being debt-free, which is a powerful thing. I won't try and tell which is more important to you

* not exactly as balance would decrease over the year, but my point is roughly right.

Yes this is also what my wife just said to me just now. At the moment our mortgage is still just 1.13% (because we locked in a while back) and we've invested some money in ISAs and savings accounts just this year when savings rates are good. I guess it's the idea of handing over a big amount of money in one go that makes me a bit nervous.

But makes me feel reassured that those of you who've done it have said it's the best thing you've ever done, hasn't affected your credit scores adversely, and that I've not overlooked anything major. Sounds a bit stupid because one of my long term goals has always been to be mortgage free before retirement age and here it is now and I'm hesitating

Nitefly · September 2023

Plus, of course, you now own the asset outright.

nero1701 · September 2023

Paid it off at 43, best day ever.

The place I bought 4 years ago has just been valued 36% above what I paid.

fastonebaz · September 2023

Pay it off. Peace of mind. Use the cash to start investing so aswell as earning % on investing you're saving % on mortgage so double impact of Yr money.

Save up a bit, turn buy a 2nd flat rent it out use the surplus to fund Yr car. Means free car plus keep your asset investment plus value if your asset grows. Win win.

thumpingrug · September 2023

Im three years off being mortgage-free. If I came into some money tomorrow it would be the first thing I would do. No hesitation, no regret. Get that out of the way once and for ever.

Having the security of the roof over our heads will be a massive weight off my mind.

viz · September 2023

I’d invest as much salary sacrificed income into pension up to 60k a year, then dump the next 40k into two high interest ISAs, then find other high interest accounts like SF said, for any remainder. And wait till your low interest rate expires before paying any excess of the house off (and watch out for fees). At least, that's the approach I took, this is not advice

RaymondLin · September 2023

It all depends on the interest paying on the mortgage vs how much interest i get on interest rate and how much of the mortgage left.

But without knowing any of the variables, yes, i would pay it all off.

mo6020 · September 2023

A few people have already touched on this, but it all depends on what mortgage rate you're on and what your expected returns would be if you invested the money you'd be paying it off with. Hard to say without knowing your personal situation, but I wouldn't pay mine off atm.

roundthebend · September 2023

I want to get rid of our mortgage, it's not huge as a proportion of our household earnings but it's big enough that it annoys me. Our only hope is likely to be downsizing, which we plan to do in the next year or two. Then I intend to put money into pension instead.

If I suddenly came into enough money to clear the current mortgage I'd do just that. It's just peace of mind that I'd like, and with the spare money I'd have I'd manage my debts and investments just fine as I already do.

mo6020 · September 2023

roundthebend said:

If I suddenly came into enough money to clear the current mortgage I'd do just that. It's just peace of mind that I'd like, and with the spare money I'd have I'd manage my debts and investments just fine as I already do.

A few people have said this, but surely if you had the money invested to clear your mortgage and it was earning you more money than paying your mortgage off would doesn't that give you MORE peace of mind?

CMW335 · September 2023

I bought a couple of rental properties with savings and the profit from those covers my home mortgage and council tax with change left over.

Dodge · September 2023

Yep, no brainer. I paid mine off about 10 years ago in my late 30s. Life changing.

MaxA867 · September 2023

To echo what others have said, check what returns you could get on fixed rate savings accounts vs what you’d pay in interest, but also factor in any early repayment charges if you paid it off before the end of your fixed term.

Mrs and I paid ours off last year and as others have said, best decision we ever made, the peace of mind knowing that as long as we pay the council tax and the energy bills no one can kick us out is worth it’s weight in gold.

lustycourtier · September 2023

Ive been sorting out my mortgage this week and I need to find £400 a month more from March. Fantastic. Id love to pay it off.

roberty · September 2023

I'm fixed on 1.48% for another two years. Overpaying by nearly 100% atm

jasonbone75 · September 2023

nero1701 said:

Paid it off at 43, best day ever.

The place I bought 4 years ago has just been valued 36% above what I paid.

On the less exciting side of that coin - 43 wasn't that far from when mine started

roundthebend · September 2023

mo6020 said:

roundthebend said:

If I suddenly came into enough money to clear the current mortgage I'd do just that. It's just peace of mind that I'd like, and with the spare money I'd have I'd manage my debts and investments just fine as I already do.

A few people have said this, but surely if you had the money invested to clear your mortgage and it was earning you more money than paying your mortgage off would doesn't that give you MORE peace of mind?

Not exactly.
Because mortgage rates can change, and they certainly have this year. Now, the current fluctuations are mirrored to a degree in savings rates changing too so your point still stands true. But it's entirely possible that mortgage rates could go up due to factors relating only to the property market.

Of course, I could just sit on the money when that makes more sense, and clear the mortgage when that makes more sense. That's not how I would operate. I'm not really an investor type, I want a simple life where I have minimal debt.

axisus · September 2023

My gut instinct would obviously be to pay it off ASAP, but I remember in the back of my mind that many years ago my parents were advised to not close it but keep just a small amount not payed off. I have no clue what that related to and it may just have been the UK economical situation at the time, but I would have to at least look into that.

Sporky · September 2023

Leaving a teeny balance could be a few things.

Early repayment penalty
Credit rating
Ability to easily borrow against the equity

There are probably others.

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Mortgages - would you pay it all off if you could?

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