No hurry to pay off the mortgage
Discussion
The Moose said:
Not the same thought process for a business as an individual...especially when you're talking about the roof over their family's head.
Dumping all your free cash into the mortgage means you are stuffed if anything else goes pop. The process from missing a payment to actually getting evicted is extremely long these days (and was indeed paused during COVID).. not being able to fix your car / boiler / roof will become a problem far sooner.NickCQ said:
The Moose said:
Not the same thought process for a business as an individual...especially when you're talking about the roof over their family's head.
Dumping all your free cash into the mortgage means you are stuffed if anything else goes pop. The process from missing a payment to actually getting evicted is extremely long these days (and was indeed paused during COVID).. not being able to fix your car / boiler / roof will become a problem far sooner.The smaller the mortgage, the smaller the potential payment you can make and therefore the more jobs that are open to you to meet your commitments.
NickCQ said:
Interesting, just looked this up and as you say Co-op appears to have some option where you can pay into what appears to be an offset account sitting alongside the mortgage, even if you don't have an "offset mortgage". AFAIK that's not the case for the majority of High St mortgages unless you specifically opt for an offset.
Nationwide allow you to overpay, which can then be used to pay off the mortgage if required. Eg if you have £7k overpayment, and a £1k/m mortgage, then you could stop paying additional funds to the company for 7 months without it being a problem, or considered going to default etc. I thought all companies allowed that? Condi said:
Nationwide allow you to overpay, which can then be used to pay off the mortgage if required. Eg if you have £7k overpayment, and a £1k/m mortgage, then you could stop paying additional funds to the company for 7 months without it being a problem, or considered going to default etc. I thought all companies allowed that?
That's what I said upthread - you can usually take payment holidays up to the amount of past overpayments. It's different to what Co-op appears to allow, which is re-drawing the entire overpayment. Per the example, if you pay a £10k lump sum, most mortgages would only allow you to get back £1k / month (or whatever your monthly pmt is). Co-op allows you to take the whole £10k back, it seems.NickCQ said:
Welshbeef said:
Nice - marginal tax rate dependant that’s the equivalent to a £14k salary uplift for a 40% tax payer.
It's not though. At the tail end of a mortgage a v high % of that cash is principal anyway, so it's just transferring value from left pocket to right pocket.physically his cash flow position £0.7k pcm improvement in effect means he’s given himsel a c&14k payrise.
I like showing savings in this way, be it mortgage/loans/utilities/sky food shopping. Cost avoidance is just as good as a payrise even better when both happen.
Welshbeef said:
Physically his cash flow position £0.7k pcm improvement in effect means he’s given himsel a c&14k payrise.
I like showing savings in this way, be it mortgage/loans/utilities/sky food shopping. Cost avoidance is just as good as a payrise even better when both happen.
Previously he was effectively putting c. £550 / month into savings. The question to ask should be "do I want to maintain the same savings rate or do I want to increase consumption"? Just automatically spending more because you aren't being forced to save at the same rate by the mortgage is poor financial management.I like showing savings in this way, be it mortgage/loans/utilities/sky food shopping. Cost avoidance is just as good as a payrise even better when both happen.
ro250 said:
NickCQ said:
ro250 said:
It's a repayment mortgage with Co-operative and I'm pretty sure, having had a conversation with them last year, that I can access my overpayment fund at any time. When our current fixed deal ends we'll have the option to use the overpayment fund against the outstanding balance (and then won't be able to withdraw it).
Interesting, just looked this up and as you say Co-op appears to have some option where you can pay into what appears to be an offset account sitting alongside the mortgage, even if you don't have an "offset mortgage". AFAIK that's not the case for the majority of High St mortgages unless you specifically opt for an offset.NickCQ said:
ro250 said:
Our mortgage overpayments go into an overpayment fund which I thought was quite common? My understanding was we can take money back from that fund whenever we want.
That's certainly the case for an offset mortgage. On regular mortgages I think the way it usually works is that you can take future payment holidays up to the value of past overpayments. If, say, you dump £10k in, you can only get that back £1k at a time (or whatever your monthly payment is).
k you. I'll just pay from my savings. NickCQ said:
It's not though. At the tail end of a mortgage a v high % of that cash is principal anyway, so it's just transferring value from left pocket to right pocket.
If you can get your head around that then mortgage debt is a very different proposition.A £million mortgage is just moving money between your assets. There’s a bit of interest and market risk to consider, but the mortgage should feel a whole lot less scary.
You can even remortgage if you need in future do the money is still there.
Welshbeef said:
I know
physically his cash flow position £0.7k pcm improvement in effect means he’s given himsel a c&14k payrise.
I like showing savings in this way, be it mortgage/loans/utilities/sky food shopping. Cost avoidance is just as good as a payrise even better when both happen.
How so, hasn’t he already being paying tax on the £700. physically his cash flow position £0.7k pcm improvement in effect means he’s given himsel a c&14k payrise.
I like showing savings in this way, be it mortgage/loans/utilities/sky food shopping. Cost avoidance is just as good as a payrise even better when both happen.
I am presuming the £700 is already out of a salary, so whether paying off the mortgage, saving, having fun the tax has already been paid.
You can’t up the £700 figure just because the mortgage is paid off.
tighnamara said:
Welshbeef said:
I know
physically his cash flow position £0.7k pcm improvement in effect means he’s given himsel a c&14k payrise.
I like showing savings in this way, be it mortgage/loans/utilities/sky food shopping. Cost avoidance is just as good as a payrise even better when both happen.
How so, hasn’t he already being paying tax on the £700. physically his cash flow position £0.7k pcm improvement in effect means he’s given himsel a c&14k payrise.
I like showing savings in this way, be it mortgage/loans/utilities/sky food shopping. Cost avoidance is just as good as a payrise even better when both happen.
I am presuming the £700 is already out of a salary, so whether paying off the mortgage, saving, having fun the tax has already been paid.
You can’t up the £700 figure just because the mortgage is paid off.
It sound a bit odd because we think of spare cash in net terms but salaries as gross (pun maybe intended).
dmahon said:
A £million mortgage is just moving money between your assets. There’s a bit of interest and market risk to consider, but the mortgage should feel a whole lot less scary.
You can even remortgage if you need in future do the money is still there.
Exactly. It's about considering your total assets & liabilities in the round and deciding whether you are happy with the allocation / diversification & total leverage. It might make sense to have a 30-50% LTV mortgage indefinitely at these sorts of interest rates if you are in a position to take a bit more risk overall in your portfolio. Even better if you have one of those PH magic money tree businesses that produce 10%+ annual returns without risk You can even remortgage if you need in future do the money is still there.
GadgeS3C said:
tighnamara said:
Welshbeef said:
I know
physically his cash flow position £0.7k pcm improvement in effect means he’s given himsel a c&14k payrise.
I like showing savings in this way, be it mortgage/loans/utilities/sky food shopping. Cost avoidance is just as good as a payrise even better when both happen.
How so, hasn’t he already being paying tax on the £700. physically his cash flow position £0.7k pcm improvement in effect means he’s given himsel a c&14k payrise.
I like showing savings in this way, be it mortgage/loans/utilities/sky food shopping. Cost avoidance is just as good as a payrise even better when both happen.
I am presuming the £700 is already out of a salary, so whether paying off the mortgage, saving, having fun the tax has already been paid.
You can’t up the £700 figure just because the mortgage is paid off.
It sound a bit odd because we think of spare cash in net terms but salaries as gross (pun maybe intended).
Too complicated for me
I will stick to actual incomings and outgoings.NickCQ said:
Previously he was effectively putting c. £550 / month into savings. The question to ask should be "do I want to maintain the same savings rate or do I want to increase consumption"? Just automatically spending more because you aren't being forced to save at the same rate by the mortgage is poor financial management.
It gives you options for sure. I guess for most when they have cleared the mortgage it’s probably sensible to celebrate that by using a number of months normal mortgage payments, but after that you might be putting this money aside pulling forwards your retirement date (again you can choose if you actually retire at that age but it’s a comfort blanket).
You could try a new skill - paying for tuition be it for hobby an interest or career change to maybe something you’d rather be doing.
tighnamara said:
Get the freeing up money but not the gross pay rise, maybe just a different way of looking at it, but I don’t see using £700 for something else as a £14,000 pay rise.
Too complicated for me I will stick to actual incomings and outgoings.
I only really find the grossing up thing useful for things like deducting travel costs (e.g. season tickets) from quoted annual salaries where you have a net and gross figure to compare.Too complicated for me
I will stick to actual incomings and outgoings.rossub said:
Well my first ever S&S payment went in this month and so far, I’d have been marginally better putting it into the mortgage.
It’s about time there was a crash to make people realise things can go down as well as up.
From my experience when there has been a crash in the Stock market, its lasted less time than a crash in the housing market. I know where I feel my money is safer. Also S&S are far more liquid so its easier to make money from the recovery It’s about time there was a crash to make people realise things can go down as well as up.
YouWhat said:
rossub said:
Well my first ever S&S payment went in this month and so far, I’d have been marginally better putting it into the mortgage.
It’s about time there was a crash to make people realise things can go down as well as up.
From my experience when there has been a crash in the Stock market, its lasted less time than a crash in the housing market. I know where I feel my money is safer. Also S&S are far more liquid so its easier to make money from the recovery It’s about time there was a crash to make people realise things can go down as well as up.
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