No hurry to pay off the mortgage

[thepeoplespal]

Glosphil said:

An early poster mentioned MIRAS as "paying the mortgage". Hardly. It gave tax relief on the interest on the first
£30k of the mortgage.
I had my first mortgage in 1971 when I was earning about £1700 per annum & my wife about £2000. Mortgage was 100% of £5750 house price at 10% interest rate.
Next 2 house purchases were funded by a £7000 endowment mortgage and then added a £5000 endowment mortgage.
The next move added a term mortgage.
A change of job gave a decent salary plus quarterly commission & bonuses. We lived off the salary & used the bonuses & commission to pay down the mortgage by £12k per year. After mortgage paid off our endowment policies (for £5k & £7k) paid out a total of £27k. So debt free with decent savings, & 2 daughters left home, by 54 years old.

Back in the day those endowment mortgages really were worth having, unlike today where they rarely pay out what is needed or they are much riskier than a repayment one. I'm assuming a 'term' mortgage means 'repayment', I''ve never heard that before.

I remember my dad talking about building a silo and silage clamp in 1974 and inflation effectively wiping out the debt a few years later. Scary times with interest rates at 10% and potentially a lot more.

[chip*]

Glosphil said:

An early poster mentioned MIRAS

Showing my age now....
I was in shorts, and I remember my sister telling me about MIRAS as a benefit of her retail banking job. With the high interest in the 80's, MIRAS was a very attractive perk, and was probably the main driver that steered me into the Banking industry. I guess I was probably ahead of the curve considering "free" money towards my future mortgage repayment, but I realised later in life / mid-30's that the real benefit was my final salary pension!

[Grrbang]

Condi said:

Stocks and shares should have done/be doing more than 1.5%, but there is little argument to have cash savings when you don't need them at the moment.

Thanks for mentioning stocks and shares ISAs, I've had a proper look into them. Very tempted to open one as a 10 year plus investment to beat inflation. Regarding timing, I missed the boat on the March dip, but reckon the outcome of the US election could provide another good jumping-on point.

[keo]

Congrats on paying so much off the mortgage! I always wanted to pay my mortgage downi was doing ok but I have just increased it thinking life is to short and enjoy it. Of course there is no right or wrong I have been a bit daft but I am happy so

[C Lee Farquar]

chip* said:

Showing my age now....
I was in shorts, and I remember my sister telling me about MIRAS as a benefit of her retail banking job. With the high interest in the 80's, MIRAS was a very attractive perk, and was probably the main driver that steered me into the Banking industry. I guess I was probably ahead of the curve considering "free" money towards my future mortgage repayment, but I realised later in life / mid-30's that the real benefit was my final salary pension!

Was there an additional benefit for Banking staff?

As I remember it, everyone got 'mortgage interest relief at source' up to £30k, or £60k if a joint mortgage of unmarrieds.

[usn90]

You know on mortgage rates, say 5 year fixed rate of say 1.94%, the follow on rate 3.35%.

Assuming you just left it Is that 3.35% basically your worst case scenario once the initial 5 years is up, regardless of what the new fixed rates by then could be?

[NickCQ]

C Lee Farquar said:

Was there an additional benefit for Banking staff?
As I remember it, everyone got 'mortgage interest relief at source' up to £30k, or £60k if a joint mortgage of unmarrieds.

BIK type rules were much more lax back in the day, so you could get a discounted mortgage from your employer without a benefit in kind tax and also get MIRAS on the discounted interest.

Merchant bank employees in particular spent lots of time thinking of creative fiddles. The probably apocryphal story is that one year some bright spark figured that if you got paid in commodities (i.e. physical gold / silver etc) then you didn't have to pay income tax... this was soon shut down.

EDIT: that last one survived for some time
https://www.theguardian.com/politics/2017/aug/07/p...

“People used to be paid in all sorts of assets – hay, wine, Persian carpets, Turkish lira, gold bullion, platinum – all these arrangements were freely available and a means of avoiding tax and National Insurance contributions on bonuses.”

[db10]

When I started doing tax in 96 people were getting paid in “platinum sponge” to avoid tax 😂

[Zoobeef]

Rates are already rising.
HSBC offered me 1.14% about 6 weeks ago, I left the remortgage until the last minute and the best they can do is 1.99% now.
Barclays were 1.57 last week and thats now into the 1.6s I think.

I have 20 years left but I'm dropping that to 10 years, that would still put repayments lower than I have been paying for the last 8 years anyway.

[John Locke]

Fascinating to look at this old thread. My personal mortgage days are long gone; my first with wife #1 was a twenty year option mortgage in 1971 (notional tax relief was deducted from the interest as my pay wasn't sufficient to to take full advantage of the basic rate tax relief then available), my last, a ten year repayment one after starting from scratch with wife #2, but having the advantage of high earnings, but modest housing requirements.
My (younger) wife #3 is about to buy us a new home on an 18 year repayment mortgage, with a 5 year fixed rate of 1.59%. All I have learned from the 5 decades of house buying and financing, is that we cannot predict what the future holds, so have to react to the situation prevailing, but pay whatever the debt is, as quickly as possible for security and peace of mind.

[hotchy]

John Locke said:

Fascinating to look at this old thread. My personal mortgage days are long gone; my first with wife #1 was a twenty year option mortgage in 1971 (notional tax relief was deducted from the interest as my pay wasn't sufficient to to take full advantage of the basic rate tax relief then available), my last, a ten year repayment one after starting from scratch with wife #2, but having the advantage of high earnings, but modest housing requirements.
My (younger) wife #3 is about to buy us a new home on an 18 year repayment mortgage, with a 5 year fixed rate of 1.59%. All I have learned from the 5 decades of house buying and financing, is that we cannot predict what the future holds, so have to react to the situation prevailing, but pay whatever the debt is, as quickly as possible for security and peace of mind.

I wouldve learned after wife two but fair play lol

[John Locke]

hotchy said:

John Locke said:

Fascinating to look at this old thread. My personal mortgage days are long gone; my first with wife #1 was a twenty year option mortgage in 1971 (notional tax relief was deducted from the interest as my pay wasn't sufficient to to take full advantage of the basic rate tax relief then available), my last, a ten year repayment one after starting from scratch with wife #2, but having the advantage of high earnings, but modest housing requirements.
My (younger) wife #3 is about to buy us a new home on an 18 year repayment mortgage, with a 5 year fixed rate of 1.59%. All I have learned from the 5 decades of house buying and financing, is that we cannot predict what the future holds, so have to react to the situation prevailing, but pay whatever the debt is, as quickly as possible for security and peace of mind.

I wouldve learned after wife two but fair play lol

You'd think, wouldn't you?

[Noodle1982]

I've got 4 years left on my mortgage. The current term is coming to an end in march and I'll be in a position to pay the remainder off while at the same time leaving more than enough in my personal account (I live quite a simple life)

However, with the interest rates being so low the interest I'd be paying over the next 4 years, if I was to let the mortgage run, would be approx £1200 which I'm not too fussed about.

I've thought of letting the mortgage run and spending a chunk on a car and enjoying my money but then my sensible head kicks in and tells me to pay the mortgage off and be done with it.

What would you don in this position? Pay off the mortgage or let it run?

[Crafty_]

I paid it off.

Consider that you'll have a chunk more disposable every month due to no mortgage payment, it will soon rack up.

[Gixer968CS]

Noodle1982 said:

I've got 4 years left on my mortgage. The current term is coming to an end in march and I'll be in a position to pay the remainder off while at the same time leaving more than enough in my personal account (I live quite a simple life)

However, with the interest rates being so low the interest I'd be paying over the next 4 years, if I was to let the mortgage run, would be approx £1200 which I'm not too fussed about.

I've thought of letting the mortgage run and spending a chunk on a car and enjoying my money but then my sensible head kicks in and tells me to pay the mortgage off and be done with it.

What would you don in this position? Pay off the mortgage or let it run?

Was having a similar conversation with my partner at the weekend. We have a small mortgage and will be in a position to clear it in the New Year. I don't think we will though, with interest rates so low it doesn't make sense. Instead we will overpay each month so the mortgage is paid down more quickly and then invest the lump sum we could've used to clear the mortgage. I pay about 2% on the mortgage and I'm sure to beat that with even the most cautious investment.

[ChocolateFrog]

Noodle1982 said:

I've got 4 years left on my mortgage. The current term is coming to an end in march and I'll be in a position to pay the remainder off while at the same time leaving more than enough in my personal account (I live quite a simple life)

However, with the interest rates being so low the interest I'd be paying over the next 4 years, if I was to let the mortgage run, would be approx £1200 which I'm not too fussed about.

I've thought of letting the mortgage run and spending a chunk on a car and enjoying my money but then my sensible head kicks in and tells me to pay the mortgage off and be done with it.

What would you don in this position? Pay off the mortgage or let it run?

For me it's nice not to be beholden to the bank, even if the arrangement is largely beneficial.

I'd just pay it off.

[Welshbeef]

Noodle1982 said:

I've got 4 years left on my mortgage. The current term is coming to an end in march and I'll be in a position to pay the remainder off while at the same time leaving more than enough in my personal account (I live quite a simple life)

However, with the interest rates being so low the interest I'd be paying over the next 4 years, if I was to let the mortgage run, would be approx £1200 which I'm not too fussed about.

I've thought of letting the mortgage run and spending a chunk on a car and enjoying my money but then my sensible head kicks in and tells me to pay the mortgage off and be done with it.

What would you don in this position? Pay off the mortgage or let it run?

At a guess c£300pa mortgage interest would @2% indicate about £15k.

You state you have more than enough savings to cover this and still have some set aside.

Pros
1. mortgage is costing you (?)2% whereas your savings rate will be much much less ie financially you gain.
2. The satisfaction of being (assuming you’re username has some relevant to age) 38 years old and mortgage free.

Cons
1. Do you have any other debt which is a higher APR than the mortgage - if so you should always clear the highest costing debt first.
2. Do you have at least 6 months after tax salary in a savings account? In these times more so than any other time 6 months if not more is very important.
Clearly you have to pay council tax water rates but you could turn the heating off to drastically reduce utilities.
What is your minimum monthly £ to survive?

What about chipping away at it from now until March monthly overpayments dragging the remaining time down and as it’s end of March we will likely see how the covid 19 fall out will be impacting everything.

One tip - whenever you do pay it off celebrate for a few months spending the whole monthly mortgage value. Thereafter keep saving that value - start with paying off your credit card in month / drag it forward which reduces short term borrowing then the rest throw into premium bonds etc and who knows you might want to move again at some point then you have an even bigger deposit or simply your house + the extra buy next house mortgage free again.

Or pay it into Enhanced pension payments / ISA with the aim of pulling forward the safe date you can retire - you can take cash out whenever you like but instead of 68 you could drag it forward many years

[p_k_n]

Whilst there is no doubt that being mortgage-free is a great place to be, I can't bring myself to overpay at present. My current mortgage rate is 1.59% and my ISA has returned 34% over the past 3 years and I'm expecting 2021 to be a great year in the markets (especially with a potential cryptocurrency bull market coming). I think in some ways it's riskier paying off a mortgage early due to the potentially huge opportunity costs but everyone has their own risk appetite and objectives in life which is fine.

[Noodle1982]

Welshbeef said:

Noodle1982 said:

I've got 4 years left on my mortgage. The current term is coming to an end in march and I'll be in a position to pay the remainder off while at the same time leaving more than enough in my personal account (I live quite a simple life)

However, with the interest rates being so low the interest I'd be paying over the next 4 years, if I was to let the mortgage run, would be approx £1200 which I'm not too fussed about.

I've thought of letting the mortgage run and spending a chunk on a car and enjoying my money but then my sensible head kicks in and tells me to pay the mortgage off and be done with it.

What would you don in this position? Pay off the mortgage or let it run?

At a guess c£300pa mortgage interest would @2% indicate about £15k.

You state you have more than enough savings to cover this and still have some set aside.

Pros
1. mortgage is costing you (?)2% whereas your savings rate will be much much less ie financially you gain.
2. The satisfaction of being (assuming you’re username has some relevant to age) 38 years old and mortgage free.

Cons
1. Do you have any other debt which is a higher APR than the mortgage - if so you should always clear the highest costing debt first.
2. Do you have at least 6 months after tax salary in a savings account? In these times more so than any other time 6 months if not more is very important.
Clearly you have to pay council tax water rates but you could turn the heating off to drastically reduce utilities.
What is your minimum monthly £ to survive?

What about chipping away at it from now until March monthly overpayments dragging the remaining time down and as it’s end of March we will likely see how the covid 19 fall out will be impacting everything.

One tip - whenever you do pay it off celebrate for a few months spending the whole monthly mortgage value. Thereafter keep saving that value - start with paying off your credit card in month / drag it forward which reduces short term borrowing then the rest throw into premium bonds etc and who knows you might want to move again at some point then you have an even bigger deposit or simply your house + the extra buy next house mortgage free again.

Or pay it into Enhanced pension payments / ISA with the aim of pulling forward the safe date you can retire - you can take cash out whenever you like but instead of 68 you could drag it forward many years

38yrs old, £45k remaining, no other debt. Zero kids and living on my own. Combined monthly outgoings without the mortgage is approx £700.

Im self employed so have always had savings set aside along with surplus funds in the business accounts. My folks struggled financially when I was younger so I've always had an appreciation for money and cash management. I could live a much more extravagant lifestyle quite comfortably but that doesn't interest me.

However, the 14yr old Jag XK may be getting changed next year for something a bit newer.

[C Lee Farquar]

NickCQ said:

BIK type rules were much more lax back in the day, so you could get a discounted mortgage from your employer without a benefit in kind tax and also get MIRAS on the discounted interest.

I had forgotten about subsidised mortgages. I take it they are a thing of the past now?