Pay off mortgage or savings?

cyber69

cyber69

cyber69

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Got a small mortgage (re-payment) with about 15 years to pay on it and just inherited an amount just enough to pay it off.

Do it pay it off or stash the cash in a bank? My job is a bit so/so at the moment so it would be nice to know the house is owned if everything went downhill.
 
Pay it off. With the extra money per month, saving from then on will be easier, and you will have a lot more breathing space.

Your priority should always be clearing debt before saving, as your debt will only grow and you will be forced to use it in the future anyway.

Bit cheesy i know, but money saving expert helped me a lot, and im now well on the way to having my deposit sorted because of him.
 
As a rule of thumb, pay off debt before anything else. There are things to remember with this however. Ultimately it depends what your mortgage rate is, and if you feel you could 'beat' it. The answer will probably be 'No'.
 
It's an easy choice. If the mortage is a higher interest rate than you'll get by saving it pay it off, if it's lower save it.
 
Firstly having no debt would be easily the best choice but you need to do some research. Some mortgage companys dont want you to pay off your mortgage early so give you extra charges when you do. If I look at my mortgage I can overpay by 10% a year without penalty. If are on a fixed rate and can get a higher rate of interest by investing your money then it of course makes sence to invest it but i doubt that is possible in the current finacial climate. So, do some more research before you decide what to do.
 
My general rule of thumb is pay off or pay off with savings if possible. Only the very best ISAs will offer a better rate than the interest on a mortgage.

It is however, sensible to retain some savings incase of an emergency (car, etc).
 
If you might need access to the money then get yourself an offset mortgage and put the money in as savings. The savings will then offset the mortgage interest, so if you have say a £100k mortgage and you have £50k in savings then you only pay interest on £50k. That way you vastly reduce any interest you pay and you then pay off the capital sum off more quickly.
 
Invest, you might find you make more money that way! E.g. In property.

It all comes down to how much we are talking about here :)
 
On the assumption that unlike most of General Discussion you are not some sort of leet pro invest0r that can borrow money for less than the average return on your superl33t investments, it will of course save you money to pay the mortgage off, in full, right now.

But there is another example - the flexibility having that capital available gives you. You must value this flexibility, which only you can do, and then decide if the value to you of the flexibility is worth the opportunity cost you will incur (ie, the extra interest etc) of not clearing the mortgage.

Probably the biggest example of a benefit of this flexibility is that you could use it to purchase another property, whereas if you had no capital but no mortgage on yours you'd find it a bit more difficult to do.
 
isn't there a school of thought that says you shouldn't ever pay off your mortgage totally, keeping some credit is good for your credit record & its relatively cheap to get the bank to look after your deeds by keeping a minimal amount outstanding in the account and paying off the interest.

In terms of job security and savings, work out how much you need to survive for 3-6 months (longer if its going to be hard to find a new job) and keep that back in savings
 
Chris. said:
Your priority should always be clearing debt before saving, as your debt will only grow and you will be forced to use it in the future anyway.
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Certainly depends on the type of debt, so that advice is very general, although quite true. For example, a student loan can work out so low on repayments it's a no brainer to put the money you would pay off the debt with into a high interest saving/investment then pay the loan off with that. The higher interest earnt means you come out better off.
 
Siliconslave said:
isn't there a school of thought that says you shouldn't ever pay off your mortgage totally, keeping some credit is good for your credit record & its relatively cheap to get the bank to look after your deeds by keeping a minimal amount outstanding in the account and paying off the interest.

In terms of job security and savings, work out how much you need to survive for 3-6 months (longer if its going to be hard to find a new job) and keep that back in savings
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Perhaps in a school where they hand out only ungraded results :p

I can see the logic, no wait, actually I can't. Why would you want to pay any interest if you didn't need too? Moreso, if you have no mortgage (because it's been paid off), you probably have plenty of savings, and would therefore be unlikely to require credit.
 
Personally I would pay off most of the mortgage and retain a reasonable amount in cash as a contingency for anything life can throw at you.
 
As people have said above, its probably best for you to pay of your mortgage early, but lots of banks don't like this so have a look at what your options are.

On the other hand, its quite rare to get a large sum of money like this, many would want to use it as an opportunity to go travelling or to invest in something
 
Lucero said:
I can see the logic, no wait, actually I can't. Why would you want to pay any interest if you didn't need too? Moreso, if you have no mortgage (because it's been paid off), you probably have plenty of savings, and would therefore be unlikely to require credit.
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I think the 'I wish to buy additional property' is one of the few examples where it could actually be beneficial not to pay it off.

You have a £200k outstanding mortgage. You inherit £200k. You wish to buy another property for investment purposes.

You'd be far better off spending that £200k on the additional property and maintaining your existing mortgage than you would trying to get a buy to let mortgage, for example...

Having a large amount of capital available does open up a few opportunities that would be closed to you without it. Perhaps if you wanted to build your own house or something (Something else thats its hard to get funding for).

I appreciate both of these are fairly unlikely scenarios for the OP but people do both and therefore it's not quite true to offer blanket advice of 'Pay it off' even though in 95% of cases 'Pay it off' is the correct path to take.
 
[TW]Fox;20006020 said:
IMHO advice with no rationale is worthless.
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only if the rationale is worth listening too, sometimes a quote and run is much better than a few paragraphs of drivel or ranting :p:D

Lucero said:
Perhaps in a school where they hand out only ungraded results :p

I can see the logic, no wait, actually I can't. Why would you want to pay any interest if you didn't need too? Moreso, if you have no mortgage (because it's been paid off), you probably have plenty of savings, and would therefore be unlikely to require credit.
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this does still depend on people’s own circumstances, assets, liabilities and investments but for the regular overclocker then tbf I 100% agree.
 
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