Mortgage Rate Rises
- Thread starter glenimp617
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Being a grown up sucks balls doesn’t it.
How much of an overpayment would a 5090 have been…?
Soldato
Wouldn’t you have been better off putting it in a savings account paying over 4% until next September then making the over payment at that point?
Yes he would have been.
This is the way.
Many people either believe big balance trumps small balance and simply don't understand it percentages.
Other people value "feelings" and just like to see the balance on their mortgage speed to zero.
Some people probably just want the simplicity of that one step process of straight to mortgage payment.
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And some people don’t understand money
Tried to cover that one in the first point.
But yeah I think that's the biggest one. I find many older people seem to think just paying off your literal mortgage is the best thing.
Basically:
"Its ALWAYS better to have 0 mortgage and 0 savings than 100k mortgage and 100k savings."
Man of Honour
In many cases it is, as long as you're not solely concerned with the immediate economics spreadsheet and you hold some values outside of pure numbers such as human psychology. The borrower is slave to the lender, and this can have effects way beyond a simple debt cost vs prospective investment growth calculation. I am a follower of the Dave Ramsey school of thought on this.
Soldato
I just hate debt so for me personally getting rid of mortgage is way more important that £20 in my savings for example. Mortgage/rent free is something I aim to achieve ASAP.
I understand the point you're making but that's not 100% true.. up to the point where you have 0 mortgage at least you're crazy to not have a fairly liquid cushion in case something goes wrong.
but you can pay off said mortgage debt faster by leaving cash saving at 4.x% rather than paying the mortgage at 1.9%?
But scale it up.
If you had a 200k mortgage and 200k savings, and your mortgage was 2 percent and savings rates were 5 percent you'd basically be getting 6k a year. (3pc profit)
If 20 quid doesn't matter, it also doesn't matter you're saving even less paying the mortgage.
But I do understand the feeling aspect is important
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I'm not allowed to have over £6000 in savings so not something I can make use of.
Soldato
When i had a mortgage, many moons ago, my aim was to pay it off as quick as possible. I didn't bother looking at the ins and outs of saving for interest and they paying a lumper...
No I wouldn't, not everyone's circumstances are the same, see my previous post. I have to balance savings carefully.
Above £6000 they basically take 2% off us.
That's me
There's always something that needs fixing, or a holiday or kids want £££'s - i would never save, so all spare cash goes to the mortgage and then it can't be touched.
Life sucks, while i'm earning, i'll pay off the mortgage asap as who know what life will throw at you - at least then i'll always have a roof over my head.
5 months to go on mortgage, but only 18 months left of my current contract. As in my 50's by that point, i'll be lucky if i can find a job.
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That's me
There's always something that needs fixing, or a holiday or kids want £££'s - i would never save, so all spare cash goes to the mortgage and then it can't be touched.
Life sucks, while i'm earning, i'll pay off the mortgage asap as who know what life will throw at you - at least then i'll always have a roof over my head.
5 months to go on mortgage, but only 18 months left of my current contract. As in my 50's by that point, i'll be lucky if i can find a job.
For me it's the opposite.
If I overpaid the mortgage and lost my job that cash would be locked away when I might need it to live.
So for me I get double benefit of more liquid cash and savings rate being higher than my mortgage.
My mortgage rate was 0.84%, up to 6%, now at 5.5%. I've made hay while the sun shined with low rates. Who knows where interest rates will be year to year.
I understand where you're coming from, but for me my goal was pay off the mortgage asap.
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Soldato
I totally get the logic and the numbers behind it, it's just the emotional aspect of it is worth more to me personally. Currently my hsbc savings dropped to 4% for example, mortgage rate is going to be around 4.7-8 in a few months so mortgage debt will cost more sadly. Banks are very quick to drop the savings rates but very slow to bring them back up, obviously..
I've got 15 years left on my mortgage if I continue overpaying, it's a number I'd like to reduce to 0 ASAP.