Mortgage Rate Rises

[IvanDobskey]

I know with overpaying the mortgage that maths wise it might not be worth it and investing the money is more optimal. However I do think there's a mental satisfaction at seeing the mortgage come down as well and finally being paid off.

Definitely. Your house is your most important asset. By paying off any debt on your property, you are effectively safeguarding it. A big moment when you finally clear your mortgage.

 

[adam cool dude]

I know with overpaying the mortgage that maths wise it might not be worth it and investing the money is more optimal. However I do think there's a mental satisfaction at seeing the mortgage come down as well and finally being paid off.

You could be in a car crash tomorrow and unable to work for the rest of your life. It is all good having money "work" for you but doesn't help in those situations.

Again it is all about risk.

 

[MikeTheNative]

You could be in a car crash tomorrow and unable to work for the rest of your life. It is all good having money "work" for you but doesn't help in those situations.

Again it is all about risk.

I do agree. There's no point worrying about something with hindsight.
You can only make a decision with the facts you have at that moment, not what might or might not happen in the future.

 

[HungryHippos]

Yeah I think paying off mortgage is good too but not at the cost of everything else!

Balance in all things I suppose! Will overpay and put more into pension, probably starting next year once I've filled the ISA allowance for 2025-2026.

Your total asset value does matter, which is sum of house equity, cash, stocks, pension etc. Good to diversify across all areas.

 

[413x]

I know with overpaying the mortgage that maths wise it might not be worth it and investing the money is more optimal. However I do think there's a mental satisfaction at seeing the mortgage come down as well and finally being paid off.

My mind doesn't work like this.
To me pension and house are quite similar.

They are difficult or impossible to unlock early. Infact many never unlock their house value. (I plan to equity release).

So I see no benefit of paying of my mortgage early. But my brain works very practically where I see all that money as one big number. Same as why I have no issue loading up massive CC Debt if I have the cash mi just read it as "0".i don't succumb to over spend

 

[HungryHippos]

Yeah I do agree, and once paid off, what do you do with the money? no more mortgage to pay, so you throw it into pension or other investments instead, but you're old and it has less time to work it's magic of compounding interest.

I have a goal to pay my house off, and it's good to retire without debt as well, but it's definitely a marathon and not a sprint really.

Stocks/investments should out-perform savings or house price appreciation/mortgage costs in a long time frame.

 

[I_M_Weasel]

Most mortgages after the fixed rate period default to the banks standard variable rate which is usually absolutely awful and in reality is another one of those scams to make money out of people. If you take a two year tracker it will be well below the banks standard variable and tied to either that or the Bank of England base rate so will move up and down in line with it. Being on your banks base rate for any length of time is likely to cost you a stupid sum of money in comparison to a fixed or tracker rate.

You can't win really - won't take long stuck on SVR to cost you more than you'll save on anything other than a huge rate drop. Just have to suck it up and accept an expensive 2 year deal, or a very slightly cheaper 5 year.

Probably the best advice is to ask me what I would do - and do the opposite, I'm wrong every time!

 

[413x]

Yeah I do agree, and once paid off, what do you do with the money? no more mortgage to pay, so you throw it into pension or other investments instead, but you're old and it has less time to work it's magic of compounding interest.

I have a goal to pay my house off, and it's good to retire without debt as well, but it's definitely a marathon and not a sprint really.

Stocks/investments should out-perform savings or house price appreciation/mortgage costs in a long time frame.

As long as that 25pc tax free lump sum is still available could easily use that to pay off what's left.. But there shouldn't be any (for me) at that point.

 

[413x]

Yeah I do agree, and once paid off, what do you do with the money? no more mortgage to pay, so you throw it into pension or other investments instead, but you're old and it has less time to work it's magic of compounding interest.

I have a goal to pay my house off, and it's good to retire without debt as well, but it's definitely a marathon and not a sprint really.

Stocks/investments should out-perform savings or house price appreciation/mortgage costs in a long time frame.

Obviously many people do get that "feel good" factor from paying off the mortgage. But for me it's just numbers. It doesn't really matter where the plus numbers and minus numbers are in my"estate" it just matters how flexible they are.

I do want to pay off my mortgage before "retiring" though. But I think i can by 55 paying 1000ppm for 15 ish years. Taking me to early 50s

Keeping it at 1000ppm will mean the term should shrink too as the interest becomes less and less of that 1000

 

[HungryHippos]

As long as that 25pc tax free lump sum is still available could easily use that to pay off what's left.. But there shouldn't be any (for me) at that point.

I don't know if I'd draw it down when you can with that, as again it depends what you're doing with it, and it could complicate your ability to continue to pay more into the pension.

If anything adding more might be the move, increase the pot size + increase the amount you can take out tax-free as a % as well...

Honestly I'd probably try and get pro advice on what to do if I was nearer pension age, miles off still so building out various things is something I can do without such guidance for now.

Landscape on what to do and best practices may well have changed by that sort of time as well, at least for me.

 

[413x]

I don't know if I'd draw it down when you can with that, as again it depends what you're doing with it, and it could complicate your ability to continue to pay more into the pension.

If anything adding more might be the move, increase the pot size + increase the amount you can take out tax-free as a % as well...

Honestly I'd probably try and get pro advice on what to do if I was nearer pension age, miles off still so building out various things is something I can do without such guidance for now.

Landscape on what to do and best practices may well have changed by that sort of time as well, at least for me.

I expect at that point that's exactly when I'd want to use it though.

After that starting to get to borrowed time. Especially if health is OK but on the wane.

If I still have my sense of adventure then might be the time to do some more comfortable travel.

I fully expect to need equity release late in life. But that's so far away.. No point thinking about it.

 

[HungryHippos]

Yeah I'd def get pro advice on that though for sure, everyone has different circumstances and expenses, can't really go wrong with a giant pension pot. More options.

If you had £1M in shares/index funds in a pension today it would basically grow and let you pay yourself for years and years to come potentially, that kind of level in todays money is plenty to retire on early for many, whilst still maintaining a good salary which you can pay yourself out of investments.

I'm obviously miles off that! but £10K into pension for 20 years is £200K paid in, not including any compound growth or similar. Between workplace pension and SIPP it's doable.

 

[Blackjack Davy]

I know with overpaying the mortgage that maths wise it might not be worth it and investing the money is more optimal. However I do think there's a mental satisfaction at seeing the mortgage come down as well and finally being paid off.

It really depends on what the interest rates are if you're getting more putting it into savings thats a no-brainer. However with interest rates on an interest only mortgage at 7.25% it made sense to overpay that off sharpish.

I fully expect to need equity release late in life. But that's so far away.. No point thinking about it.

I plan to do equity release mainly so I get to spend it while I can rather than the council taking it to pay the care home fees which is essentially the situation my mother is in.

 

[slinxy]

Definitely. Your house is your most important asset. By paying off any debt on your property, you are effectively safeguarding it. A big moment when you finally clear your mortgage.

I disagree... a house that you live in is not an asset... it's like any other item that you use on a daily bases; a tool. It's also most people's biggest liability.

Until you have paid it off, you're just renting the money with a fee and interest to live in the place.

Back in the days, when houses were cheaper and mortgage rents were low.. you could buy houses and flip them or climb up the property ladder. That's why certain older people preach the 'bricks and mortar' line. But has others have mention today's market is very different and it's a PITA to get on the first rung of that ladder.

Once you pay off the mortgage or you are renting a house or few out, then it becomes an asset.

Nothing expect for whiskey has out paced the stock market for growth, and if you're pension or stocks/shares portfolio is managed correctly, it's a cheaper buy in and with better returns.

If I was a millionaire, I wouldn't buy a house to live in myself. I would just live in hotels all my life..

 

[jpaul]

I disagree... a house that you live in is not an asset... it's like any other item that you use on a daily bases; a tool. It's also most people's biggest liability.

Until you have paid it off, you're just renting the money with a fee and interest to live in the place.

Back in the days, when houses were cheaper and mortgage rents were low.. you could buy houses and flip them or climb up the property ladder. That's why certain older people preach the 'bricks and mortar' line. But has others have mention today's market is very different and it's a PITA to get on the first rung of that ladder.

Once you pay off the mortgage or you are renting a house or few out, then it becomes an asset.

egh so it is an an asset and you agreed with him.

I think the challenge is getting that asset somewhere in the country, compatible with your employment, where you want to live long term, or retire;
being on the housing ladder in Cambridge, say, doesn't qualify you to retire in Cornwall, or on the edge of a national park

 

[413x]

I disagree... a house that you live in is not an asset... it's like any other item that you use on a daily bases; a tool. It's also most people's biggest liability.

Until you have paid it off, you're just renting the money with a fee and interest to live in the place.

Back in the days, when houses were cheaper and mortgage rents were low.. you could buy houses and flip them or climb up the property ladder. That's why certain older people preach the 'bricks and mortar' line. But has others have mention today's market is very different and it's a PITA to get on the first rung of that ladder.

Once you pay off the mortgage or you are renting a house or few out, then it becomes an asset.

Nothing expect for whiskey has out paced the stock market for growth, and if you're pension or stocks/shares portfolio is managed correctly, it's a cheaper buy in and with better returns.

If I was a millionaire, I wouldn't buy a house to live in myself. I would just live in hotels all my life..

Same.

If I was rolling on it I would just travel in luxury

 

[regulus]

Interesting discussion the last page or so. I’m struggling with the same thing this very moment. I have a decent wedge in the stock market at the moment that’s just been going bonkers due to the current AI craze. We can now pay off the mortgage and be left with the same dollar amount we had in there 22 months ago. I’ve been wanting to do it since last year but keep opting to keep riding the pony ‘just one more month’, aka, pushing my luck. It’s all ETF investments so not massively risky, but we literally cannot earn what the stock market is raining down on us at the moment thanks to the Mag 7. But when AI goes ‘boom’, I’ll be a bit annoyed for the lost opportunity of getting this last monkey off my back.

It’s not the clever thing to do and in the very long run it’ll cost us 100s of thousands in lost gains, but we’re mortgage free next week if we wish. If our lifetimes were a 1000 years, it’s an easy decision. Not so clear at ages 44 and 41, respectively.

The interest we’re paying to the bank isn’t even a factor in comparison to the gains. It’s nothing, it’s peanuts. It’s just psychological.

 

[regulus]

Once again replying to myself with about 3 months of hindsight. 4 times running now. Thank God I didn't do this. Everything marching up relentlessly.

Replying to myself with 2 months hindsight. 5 times running now. Once again thankful I didn't do this, the march is still all the way up.

 

[jpaul]

newsnight categorised undecided female voters demographic (8% of voters)
as mostly being from demographic who thought tory/truss betrayal was responsible for their family budget mortgage increase (versus worldwide 'trend')

 

[b0rn2sk8]

Yes there was a trend upwards anyway but also the U.K. has a ‘idiot tax’ (risk premium) applied to lending/investment it because of the economic choices our government has made which are driven by Brexit and then Truss.

E.g. the trend was higher than it should have been if those two examples of self harm didn’t happen.