I will be 67 when ours is paid off if we stay where we are but we plan on downsizing when our children leave home. We were within a year of paying off our last place (I would have been 47) when we decided we wanted more space for our two young girls as they grow up - going from a 2.5 bed end terrace with a tiny garden to a 4 bed detached with a big private garden, big-ish rooms, en-suite etc and the girls have two play houses, a huge climbing frame and trampoline (oh, and a 'teddy bear zip wire' at the moment too) yet there is still plenty of room.
I just see it as investing in nice family home as the children grow up rather than something I need to pay off quickly. At the end of the day the mortgage is only around 35% of the house value so if we wanted to, we could downsize tomorrow (just move a couple of streets away to where some smaller houses exist) and be mortgage free.
Due to a couple of unfortunate events, resulting in my missus inheriting some money & a house (she rents that out & some goes towards overpayments) we managed to put down 40% as a deposit, mortgage was due to be paid off when we were 60, but should be done nearer 50 - 38 now. We took smaller repayments as the rate was good and we like buying pointless crap and going on holiday - although we'll probably pay an additional 10% of the total on top of the every year in overpayments to get it paid sooner.
Re. overpayments - we both stick cash into the joint account every month which easily covers household bills etc, and agreed anything left over at the end of the month got fired into the mortgage - so I don't ever think about it really, I still have "my" money and she has "hers"... last year we easily maxed out the 10% limit due to a small inheritance, but this year there's a baby crawling around the place and the wife's on mat. leave for a year so the end date might be put back a bit now 😆
Was set to be 50 after moving in my mid 30s.
Recently remortgaged to do a pile of work to the house, so as of last month now looking at 65 with the monthly payments now doubled.
Thankfully still affordable but the Lotus Elise in the garage remains a distant dream....
I'm currently going through a re-mortgage to secure a rate in to the new year and through Brexit while the rates are low. If I stick to term then I will be 52 but I intend to overpay as much as possible as I can see us moving at some point and extending the mortgage back out again.
If I'm lucky I might get a bit of inheritance to help me along the way!
My thinking
Pay 1%, 2% or 5% on a mortgage.
Or pay money into a pension and you get 20%/40% without even trying.
How about taking advantage of gearing.
Mortgages allow you to buy much more of a asset than you'd able to buy with cash.
(someone/many will come along now and say... houses are homes and should not be assets ... and I may well agree with you.... But the rest of the WORLD doesn't. So im just playing the cards as they are dealt)
Good luck
Interesting Ro5ey. So what do you do? Interest-only mortgage and plough everything into a pension?
(I don't know what "gearing" is. Quite financially naive here)
so you employ that strategy and then lose your job age 42.
cant get into your mega pension fund
cant pay your debt.
lose the house ?
Diversification is key. i have personal investments and a company pension also - but i pay down the house as its a roof over my head and ensuring that cant be taken away lifts alot of pressure- plus i dont trust the government not to raid the pension pot before i retire.
@GrahamS if you're a higher rate taxpayer you get more bang for your buck by putting the money into a pension.
For example, say you overpay by £1000 a month. That is roughly £1400 if you contributed that into your pension instead. So your mortgage rate maybe 2.5% meaning you're losing £400 to overpay the mortgage which is a "poorer" investment.
At the same time, if your pension is 100% equities and there's a market crash then you could lose out. Depends on how much risk you can tolerate I guess.
At the same time, if the market crashes then we're all shafted anyway!
I borrowed at base rate plus 0.5% for 25 years. House is increasing at a rate if 5-8% a year. The interest only aspect allows for an impressive return regardless of capital repayments. Plus I make AVC's on my pension pot for eventual mortgage payment, and have a final salary pension to fall back on.
Putting the bank's money to work for a 4% return PA on a house I would struggle to repay otherwise, then move to a cheaper/smaller house/location upon retirement on guaranteed income. What's not to like?
If you own 100% of a house worth X, or 30% of a house worth 3X, and houses increase at 5% PA, which is the better long-term investment?
The answer is "it depends". What was the question again?
For starters
- What is long term for you? 5 years? 10 years?
- What's the purpose of the investment? A pension pot? Something you can liquidate for an inheritance?
- How important is liquidity at the end of your term? A house is a lot less liquid than stocks and shares or cash.
Ro5ey makes a good point. I've not thought of it that way before. One reason it makes more sense to overpay is if you're going to be mortgage free well before you can draw your pension down. Perhaps you want to be financially independent.
The prospect of paying off the mortgage early via larger repayments / regular overpayments & getting the burden off your shoulders does sound appealing to me, however at a push we could probably sell the wife's rental house, empty savings account & cash in everything else and pay it off just now, so maybe we're spreading the bets more than I/we realize.
so you employ that strategy and then lose your job age 42.cant get into your mega pension fund
cant pay your debt.
lose the house ?
Similar impact though whether you have an interest only or a repayment mortgage. If anything they're better off as their repayments are lower. If the shit hits the fan and you sell up, you still get all the equity you had in the house, Ro5ey would just get deposit + growth, rather than deposit + growth + repayment.
It works as long as
a) your house when you buy it is worth less than 25% of your pension pot (or it still work, but only if your pension accrues more interest than the mortgage)
b) your pension doesn't crash (which would leave you with no house or pension).
The big advantage of paying the mortgage off in a more conventional way is whatever happens to the markets (stock or house prices), you always have a house irrespective of it's value.
Don't house prices have a correlation with the stock market anyway?
60 --- 5 years later than planned
Not paying early makes sense if you are on a low rate. I self built though and didn't have the choices available to buyers. Got stuck with 4.9%.
I overpaid massively over the past five years despite my accountant being unable to understand why I'd pay corp tax on earnings to pay off a mortgage instead of piling it into a pension.
As above, the pension pot may go up or down / get raided. Paying my mortgage off 17 years early saved me 60 odd K, guaranteed.
As much as the bare numbers though, just knowing it's not there to pay if one gets sick or whatever is great. I'm just not keen on debt.
Being self employed I worry a bit about earnings drying up through lack of work or illness.
£1500 or so left to go here. Just turned 41. No plans to get another.
Absolutely. Houses are not liquid its easy to say ill just sell but reality is You still need some where to stay.
divorce, starting again with a new family, plus a few years of foolishly not wanting to buy again whilst the rent was so cheap means ill now be 62 before its paid off :-/
44 and just about to remortgage (to sort out a crap endowment, pay off credit cards and fund some work on the house), so about 20 years from now...
Houses are not liquid its easy to say ill just sell but reality is You still need some where to stay.
But if you invest in a bigger property you do have the option to downsize. In my case we have a 4 bed detached as a family home which leaves us the option to downsize once the children have moved on. At current house values (and assuming the mortgage is paid off) that would leave us with around £300,000 for our retirement and still have a house worth around £250,000 which would make a nice nest egg for our children when it comes to inheritance.
41 now and was due to be mortgage free at 48. However, I'm writing this from my hospital bed with a broken back. Being self employed all bets are off now.
Bought our first house when a reasonable detached was a year's salary.
After sitting down with the FIL and working out how long it would take to pay it off *and* the mind-blowing cost of borrowing he kindly offered to loan me the balance. So the house was ours, I paid him every month instead of the building society and in a few years it was done. He never accepted a penny in interest.
That was early 90s and I've not had a mortgage since.
41 now and was due to be mortgage free at 48. However, I'm writing this from my hospital bed with a broken back. Being self employed all bets are off now.
Best of luck sir.
But if you invest in a bigger property you do have the option to downsize.
assuming you both have a decent equity to release for this smaller house and theres a buoyant property market to ensure your property is somewhat liquid. Pretty big assumptions to rely on in a time of need and also assumes the wherewithal as things fall apart to make that decision.
Anyway - hope its not too serious maycontainnuts(as not serious as a broken back can be) hears for a speedy recovery !
assuming you both have a decent equity to release for this smaller house and theres a buoyant property market
Yes there is that and I did outline my personal equity position in my statement above. However, regarding a buoyant market if the market is depressed then yes I would get less for my property but I could also buy for less too. No matter what anyone does with their money, there can be no guarantees (ie, a pension fund could be worth substantially less than the value invested, interest rates in a savings account could be outstripped by inflation so the real value of the money invested has gone down, etc etc). But we all make choices and that's the choice I personally made. I'll report back in 17 years with an update 🙂
Mortgage free for the last 18 months .. I'm currently 38 years old. It's all through hard work and spending sensibly too.
