Pay your mortgage off early or invest?

Securing the roof over your head is the most important thing you can do in my opinion. We borrowed 85k to buy our current property and have knocked that down to 56k in under two years. Ltv is only 17% now. The time for investing is after the mortgage is dealt with.
 
Agree with most of the sentiments on here

Its choice in regards risk

Speak to people who have paid off their mortgage and own their house. It feels enlightening

I now have investments that are in excess of my house value. But I am avoiding early fees, so paying the 10% (of original amount) off per year.
Ive made a higher return on investments than my interest rate on average, but its far more spiky some years double digit growth, others are down

Exit timing is everything (well also when you add the money), I put a load into FTSE tracker on the initial COVID crash, sold 18 months later and banked double digit returns annualised.
But right now that would look far less attractive.
For many people they may need some of this in adverse conditions, thats likely to conincide with economy issues and its when values drop
 
To counter the pay off mortgage people. I can pay off my mortgage now if I wanted to, but am keeping the investments. My mortgage interest rate is 1.49% compared to the 10% growth in my investments over the past 12 months (including being down 3% in last 3 months). If my goal wasn't to retire early, it might be different and I did previously start out by putting my spare money into my mortgage before getting into investments. However, I think people underestimate the feeling of freedom that having several years of expenses in investments provides.
 
Mercenary Keyboard Warrior said:
Speak to people who have paid off their mortgage and own their house. It feels enlightening
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We paid off our mortgage quite a few years ago by over paying and paying in the odd lump sums in here and there. Was a First Direct offset mortgage so there were no penalties for paying in extra and our savings offset against the interest.

As you say, paying it off felt fantastic. Not owing anyone any money and other than the inevitable bills, you get to keep virtually all your wages. Being nigh on £800 a month better off is not to be sniffed at. It also means in times like these where everything is going up, the effects are hardly felt.
 
Mercenary Keyboard Warrior said:
Exit timing is everything (well also when you add the money), I put a load into FTSE tracker on the initial COVID crash, sold 18 months later and banked double digit returns annualised.
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And let's be totally clear for all the poorly informed, informed, or even expert investors - timing the market is objectively impossible. And once it goes 'bang', you are screwed for quite some time (days, months, years).
 
Trifid said:
To counter the pay off mortgage people. I can pay off my mortgage now if I wanted to, but am keeping the investments. My mortgage interest rate is 1.49% compared to the 10% growth in my investments over the past 12 months (including being down 3% in last 3 months). If my goal wasn't to retire early, it might be different and I did previously start out by putting my spare money into my mortgage before getting into investments. However, I think people underestimate the feeling of freedom that having several years of expenses in investments provides.
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Indeed having money available is great.
My largest bill however is my mortgage, ive got approaching 6 figures in my overpayment reserve so can ask for that to be offset against needing to pay anything monthly. In theory for about 10 years :P
Most now dont, but many older mortgages allowed for overpayments to be drawn back down.
Money overpaid is not necessarily "lost", you need to understand these terms as well when you take out a mortgage. Many don't do anything but look at the headline.

You need to look at investments for more than 12 months, thats very high (10% it includes COVID bounceback period).

IMO balance is the best thing, you should have immediately availble funds (circa 3 months). longer term funds, plus for me paying off the mortgage and lowering the monthly outgoings.
And if its in regards retirement planning then you should be paying more into pensions than self investing (assuming your not capped), its far far more effective.
 
dLockers said:
And let's be totally clear for all the poorly informed, informed, or even expert investors - timing the market is objectively impossible. And once it goes 'bang', you are screwed for quite some time (days, months, years).
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Well yes and no.

Perfect timing, yeah good luck with that.
But looking for shock factors and using them as a buy/sell indicator isn't hard.

Anyone with liquid cash could have invested in FTSE (or many other market trackers) when COVID shocked the markets. It was a gamble, but one I was convinced would pay off. As soon as the recovery came it was just a matter of exit timing.
Sure it went up more than I cashed out at, but its below that point now.

My investing strategy (same for crypto) is make a return I am happy with and draw a line. Then decide the next action, don't get hung up on what ifs, once its done, forget about it.
 
Trouble is I want access to cash. Here's my 2 year plan come back to me in 2 years and we’ll find out how I’ve done - if it works out well I might just keep rinsing and repeating .

Mortgage is 1.59% fixed for another 2 years and I owe a total £51,000 . I have nigh on the whole amount saved to pay it off but at only £70 a month in interest payments I’m happy to take a punt .

Mortgage is £201 a month ( my 0% car finance is more lol ) as a repayment and interest , i remortgaged last year to give me low payments - equity I have is just silly .

So plan is .

1. Over pay mortgage by 10% to bring it down to £45,900
2. I’ve already just used my 20K stocks and shares a ISA allowance for this year
3. Top up another 20K into the ISA In the next financial year
4. Over pay the mortgage by 10% next year .

Yes I Sure there are more secure ways of a return on my money but I think I’m In the position of being able to take a punt.

My advice is if your mortgage is big overpay as much as you can , if it’s small than take a punt.
 
Mercenary Keyboard Warrior said:
Anyone with liquid cash could have invested in FTSE (or many other market trackers) when COVID shocked the markets. It was a gamble, but one I was convinced would pay off. As soon as the recovery came it was just a matter of exit timing.
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Right, but anyone who had a mortgage redemption or whatever during the first few months of COVID would have found their entire portfolio wiped out for - 2 years?
 
Mercenary Keyboard Warrior said:
Indeed having money available is great.
My largest bill however is my mortgage, ive got approaching 6 figures in my overpayment reserve so can ask for that to be offset against needing to pay anything monthly. In theory for about 10 years :p
Most now dont, but many older mortgages allowed for overpayments to be drawn back down.
Money overpaid is not necessarily "lost", you need to understand these terms as well when you take out a mortgage. Many don't do anything but look at the headline.

You need to look at investments for more than 12 months, thats very high (10% it includes COVID bounceback period).

IMO balance is the best thing, you should have immediately availble funds (circa 3 months). longer term funds, plus for me paying off the mortgage and lowering the monthly outgoings.
And if its in regards retirement planning then you should be paying more into pensions than self investing (assuming your not capped), its far far more effective.
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Yes that's the attitude/strategy I follow. I always have 3 months of household expenses "saved", just in case (although I do have insurance to cover that, but still...).

Our mortgage rate is so low, and I was relatively late to planning for retirement (started in my early 30s) that I want to build that up whilst I'm earning better money, then I can relax a bit (career wise) and focus on overpayments in due course. If I weren't so frivolous (but the way I see it, I want to live life, give my kids good experiences, and not eat crap food) I'd probably be able to overpay + invest for retirement. However, as a family we're quite active and do a fair bit of travelling/activities, and I'd rather keep doing that which is more enjoyable than necessarily worry about shortening my mortgage by 2-3 years.

Not everyone will see eye-to-eye with me on that, and that's absolutely understandable, everyone has different priorities and goals.

Being mortgage free will be a nice feeling, but so is enjoying life in the here and now. :)
 
Bald-Eagle22 said:
Trouble is I want access to cash. Here's my 2 year plan come back to me in 2 years and we’ll find out how I’ve done - if it works out well I might just keep rinsing and repeating .

Mortgage is 1.59% fixed for another 2 years and I owe a total £51,000 . I have nigh on the whole amount saved to pay it off but at only £70 a month in interest payments I’m happy to take a punt .

Mortgage is £201 a month ( my 0% car finance is more lol ) as a repayment and interest , i remortgaged last year to give me low payments - equity I have is just silly .

So plan is .

1. Over pay mortgage by 10% to bring it down to £45,900
2. I’ve already just used my 20K stocks and shares a ISA allowance for this year
3. Top up another 20K into the ISA In the next financial year
4. Over pay the mortgage by 10% next year .

Yes I Sure there are more secure ways of a return on my money but I think I’m In the position of being able to take a punt.

My advice is if your mortgage is big overpay as much as you can , if it’s small than take a punt.
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If interest rates keep rising you'll probably find very safe savings accounts delivering more than 1.59% soon enough.
 
The long term average of a stock market tracker, e.g S&P 500 is nearly 7%. Over a 20 period, the US stock market has never experienced negative returns, and over 10 years this has only ocurred once in Great Depression 1929. Out of all the crashes in the US stock market, only the 1929 crash took signifciantly long to recover, in every other crash the tracker was above pre-crash valuation within 4 months to 3 years.


That is, irrespective of when you invest, you have extremely high chance of seeing 7% returns over a typical mortgage period. The 7% expected returns is far higher than any mortgage rate and as log as that is the case then over-paying mortgage makes little sense. This kind of investment is extremely safe, doesn't require any skill, doesn't mater about investment timing .


When considering risk, you also have to consider the risks of housing market crashes which historically happen with the same frequency as stock market crashes. You also have to consider maintenance costs, and inadequate insurance risks.


Things swing even more in favour of investing when you consider taxation. In most countries you pay property taxes , and these are often linked to %age of the property you own out-with the mortgage. Interest payments from the mortgage are often tax deductible. Moreover, you can often invest via pension deductions and avoid the 40% income tax
 
D.P. said:
The long term average of a stock market tracker, e.g S&P 500 is nearly 7%. Over a 20 period, the US stock market has never experienced negative returns, and over 10 years this has only ocurred once in Great Depression 1929. Out of all the crashes in the US stock market, only the 1929 crash took signifciantly long to recover, in every other crash the tracker was above pre-crash valuation within 4 months to 3 years.


That is, irrespective of when you invest, you have extremely high chance of seeing 7% returns over a typical mortgage period. The 7% expected returns is far higher than any mortgage rate and as log as that is the case then over-paying mortgage makes little sense. This kind of investment is extremely safe, doesn't require any skill, doesn't mater about investment timing .


When considering risk, you also have to consider the risks of housing market crashes which historically happen with the same frequency as stock market crashes. You also have to consider maintenance costs, and inadequate insurance risks.


Things swing even more in favour of investing when you consider taxation. In most countries you pay property taxes , and these are often linked to %age of the property you own out-with the mortgage. Interest payments from the mortgage are often tax deductible. Moreover, you can often invest via pension deductions and avoid the 40% income tax
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Yep there you go echoed my sentiments exactly- S&P 500 here I come .
 
invest it - maybe not in Doge though :) But as above mortgage rate is X% and most things will rocket when we get out of WW3
 
Technically, investing is better because the average return from investments is higher than the average mortgage rate.
However, there's a lot to be said for the warm and fuzzy feeling of paying your mortgage off.
And, there's a lot to be said against having a lot of your wealth in investments, which can be stressful.
I split spare money 50/50 and do both, I can do that because my tracker mortgage lets me overpay whatever I like, but seeing as most people are on fixed mortgages and can only overpay 10% I'd say overpay the 10% and invest whatever's left.

There's an argument that anyone taking a fixed rate mortgage with a 10% overpayment limit has already made the decision that they're prioritising rate over overpayment - the consequence being they intend to invest any spare monies beyond the 10%.
 
throwaway4372 said:
Technically, investing is better because the average return from investments is higher than the average mortgage rate.
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That's the thing though. Mortgage rates are fixed. Averages are made up of highs and lows; no one 'trades the average'.
 
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