Paying off your mortgage

[princeperch]

the sooner the mortgage (on the place I live in) is paid off, the better. We are overpaying 2k a month at the moment and at this rate should be paid off in 5 years...

[Chicken Chaser]

I'm paying about £3k-4k a year over whilst rates are at 2.5% for me, as I've been on nearer 6% the last 5 years. Bubble will probably burst pretty soon though.

[mybrainhurts]

Confucius, he say, man who pay off mortgage get another one free from divorce court...

[Sarnie]

coyft said:

I'm amazed people are overpaying their mortgages while rates are so low. It makes no financial sense, must be psychological.

How can it make no financial sense??

[RizzoTheRat]

It only doesn't make sense if they've got other debts (loans, credit cards, etc) on a higher rate, or if their mortgage rate is lower than they can get on safe savings/investments. For anyone else surely paying it off is the best thing they can do with excess cash.

[Deva Link]

Sarnie said:

How can it make no financial sense??

You could do better with the money in a savings account than paying it back IF your rate is very low (such as the 1.29% mentioned above). And the money is still available to you in case you need it.

However the difference if pretty negligible and many people would prefer to get shut of their mortgage.

[jimslops]

Deva Link said:

However the difference if pretty negligible and many people would prefer to get shut of their mortgage.

Precisely. So it makes plenty financial sense.

[audidoody]

I had a lump sum of £30,000 two years ago. Pay down mortgage or invest? Oh let's invest - more interesting. So I stuck it in a stocks and shares ISA - which is now worth £27,400.

[jimslops]

audidoody said:

I had a lump sum of £30,000 two years ago. Pay down mortgage or invest? Oh let's invest - more interesting. So I stuck it in a stocks and shares ISA - and have a paper loss of £3,000

Did you go for low, medium or high risk?

[marcosgt]

audidoody said:

I had a lump sum of £30,000 two years ago. Pay down mortgage or invest? Oh let's invest - more interesting. So I stuck it in a stocks and shares ISA - which is now worth £27,400.

I did the same and put it into the Mortgage :smug:

M

[Ranger 6]

mattdaniels said:

If your mortgage allows it, and it doesn't compromise your lifestyle too much, how about overpaying your mortgage every month? You get a nice warm feeling of watching the mortage repayment date start to come in from the term date and you don't resent it by having to give up a lot of "quality of life" things. A happy compromise.

This - an extra £200 each month is making a very welcome difference to the term. About 8 years to go now I think

OP - give your mortgage company a call and see what £50/£100/£200 a month extra will do to the term and see how that changes your overall monthly expenditure. I'm sure you'll find a happy compromise where you can see the overpayments doing some good without missing the monthly disposable cash.

[fido]

coyft said:

I'm amazed people are overpaying their mortgages while rates are so low. It makes no financial sense, must be psychological.

But interest rates on savings are also low - and if you're higher tax rate then you needs some serious returns (6%?) to profit from having a mortgage. Meh, i'll save up while i'm living rent-free for the next place - instant access and no mortgage make the next move easier.

Edited by fido on Thursday 9th February 11:02

[Broccers]

The interest on 100k per annum @ 2 percent v interest on 120k @ 5% when it goes up and you havent overpaid? Cant see why you wouldnt over pay?

[Deva Link]

fido said:

But interest rates on savings are also low - and if you're higher tax rate then you needs some serious returns (6%?) to profit from having a mortgage. Meh, i'll save up while i'm living rent-free for the next place - instant access and no mortgage make the next move easier.

You don't need 6% if your mortgage rate is 1.29% like someone above. And there are plenty of deals from a few years ago that are less than that - colleague of mine is on base +.18% and he was miffed to just miss +.09% (with Woolwich).

Most people could invest cash in their wife's name to avoid higher rate tax.

One thing to watch though is many mortgages only allow 10% overpayment per year so if you save a lump sum you might not be able to pay it into your mortgage in one go.

[princeperch]

exactly.

rate are artificially low at the moment so makes sense to take advantage and pay down (or at least offset) as much as possible.

I have basically put everything bar 1500 quid emergency cash into the offset facility of the mortgage..

When we remortgage in a little over 2 years time we should then have in excess of a 40% deposit, closer to 50%. another 2.5 years of overpaying and the flat will be mortgage free.

remortgage that, leaving 25% down as a buy to let, and then buy a house for about 350k ish with a 100k deposit and 20k in the bank (or offset).

and this will only be possible because house prices are no longer doubling every 7 years and the B0EBR is basically nil.

If you can get a better return on your cash then fine, opportunity cost, but as someone has alluded to above, it doesnt always work out and you need to know what you are doing..

[Kudos]

princeperch said:

When we remortgage in a little over 2 years time we should then have in excess of a 40% deposit, closer to 50%. another 2.5 years of overpaying and the flat will be mortgage free.

remortgage that, leaving 25% down as a buy to let, and then buy a house for about 350k ish with a 100k deposit and 20k in the bank (or offset).

So, you clear the mortgage, then go and get another one?? Or am I missing something?

[Deva Link]

princeperch said:

remortgage that, leaving 25% down as a buy to let, and then buy a house for about 350k ish with a 100k deposit and 20k in the bank (or offset).

Who said the baby boomers had it best?

[princeperch]

Deva Link said:

Who said the baby boomers had it best?

ah. I might, (might) just about get a similar type of house that my parents (policeman and nurse) have. Their income topped out at about 50k ish joint towards the end of their career.

My missus and I earn twice that at the age of 26, studied for 6 years to become qualified, and our standard of living will be about the same as them.

(appreciate that this should be on the other thread etc etc)

one thing is for sure, if you make sacrifices in the formative years it will pay off - paying down the mortgage aggressively now will allow us to afford a BTL in our early 30s when most people are stuggling to get on the ladder. this isnt willy waving, its making a choice not to drive a fancy car, go on long haul holidays etc etc etc

[fido]

Deva Link said:

You don't need 6% if your mortgage rate is 1.29% like someone above. And there are plenty of deals from a few years ago that are less than that - colleague of mine is on base +.18% and he was miffed to just miss +.09% (with Woolwich).

I have always gone for an offset mortgage (4% or thereabouts) as i work in an industry that pays well but is variable to say the least. Obviously if you have a good fixed rate deal and you are not planning to move in the near future, then it makes sense to keep that mortgage. And when i find the right home then i will also take the longer view.

[princeperch]

coyft said:

You've got that completely the wrong way around.

some would say its a glut of cheap credit that has caused us the problems we now find ourselves in.

I'm happy to have my debt where I sleep, but, I'm also happy to pay it down and save on mortgage interest whereever possible, even if that means offsetting so I can get the money back, rather than paying off the capital...