Diesel

I have little savings - seems crazy when I have a big mortgage - like most of us in this hyper house priced environment... Why pay more in interest than you earn???

However I am aware that most of my mates have e few quid stashed 'for a rainy day' and was noting that governments borrow billions in money when they already have millions in savings.

Whats the deal here? Is my 'flexi' mortgage where I can draw down my 'credit' something pretty rare??? Seems to make a lot of sense tom me?

D

imlach

No, it's not rare. Each to their own, and really comes down to personal judgement on how you want to manage your own finances. The financial instruments are there to suit ALL situations.

As with everything, there is no prominent solution which fits all.

As an example, a flexi-mortgage would not suit someone who was less risk-averse, and wanted to use their savings in riskier investment vehicles such as equities.

Diesel

Never borrow to invest in the stockmarket!

pslewis

I took out a Flexi-Mortgage a decade ago ..... paid the Mortgage off in 6 years rather than 20!!!

They are amazing things if you are disciplined - I have maintained a tiny amount of debt so that, if I ever want to, I can draw down a very cheap loan (mortgage rate of interest)

Best thing I ever did! Do it now!!

Pete

Apparition

Best thing I ever did was to pay off the millstone errrr. sorry Mortgage. It's a great feeling to know you actually DO own your own house / home.
Yve

Diesel

Yve, do you know how much houses cost these days? Its £200k+ for something basic. Its as much as what most young people can do to pay the monthly interest - let alone paying off an extra £10kper year for 20 years to clear the debt itself...

Apparition

I'm fully aware of what houses cost. I was lucky enough to make my moves at the right time and hit the market whilst it was high. Ending with a move from a very affluent part of the country to a lower value area.It's not all sunshine and roses, at the same time I hit health probs and now cannot work full time, so I still have to reach to make the council tax etc. But thank goodness I got the biggy off my back.
I feel for the youngsters trying to get a foot on the ladder. It's more tough now than when I began.
Yve

^OPM^

i had a flexi mortgage when i brought my house 7 year ago-paid it off in 5 years tho-been 2 years now without a mortgage but now drive an 8 year old car but also never had as much money in bank or in shares as i have now tho

moral of story-save hard-work lots of overtime-and pay of mortgage as soon as you can -sorted

^OPM^

will agree with you now tho Yve-glad im not buying a house now at these inflated prices.

davedipster

You can reduce the term on most mortgages now days, with just a phone call to your building society.
As an example If you have some savings or can stretch to it...

£100,000 mortgage over 20yrs will cost you £168,500 @ 5.75%
£100,000 mortgage over 5yrs will cost £115,300 @5.75%

That's a saving of £53,200 in interest! just by reducing the term.

dipster

Apparition

Thats the cruncher.
If you can't, then you're stuffed.
Yve

imlach

Equities were only one option, and yes, best not to borrow to invest for the majority of situations. However, again, depends on the circumstances.

In the case of a personal investor, they may choose to use their £10k savings as a deposit to secure a mortgage on a property for their son/daugther at University (or on BTL). That investment may provide more return over 10 years than plunging the £10k into the existing primary mortgage. It may not however - the risk is higher.

If, however, you're just going to leave the £10k in a building soc acct, then it is probably best used offsetting your mortgage if you have one.

fast bloke

I love these threads. Especially the 'rules' like never borrow to invest, and the idea that paying off your mortgage in 2 years is actually beneficial Its better than the Beano and the Dandy put together

davedipster

So what's wrong with this advice then?

ScoobyDoo555

The idea behind paying your mortgage off early is wonderful. Ideal

Shame that most people (and Scoobynet, whilst being quite large, doesn't represent a fair proportion of the population) simply can't afford to do that.

Plus, things like families and kids are a major consideration - again I don't think Scoobynet gives a fair representation due to the population/type.....

I could be wrong though, and will apologise in advance if I have made an incorrect sweeping statement.

I would love to pay my mortgage off, both wifey and I work hard, between us earn a half decent wage, but nowhere near enough to be able to pay the mortgage off early!
Little things like a childcare bill to match my mortgage payment are one issue

I hope (well, I'm pretty sure, but you never know) that circumstances will change as the kids get older, and there will be a reprive, freeing up some funds to contribute to the mortgage.......

I would be nice to get shot of some years

Dan

The Snug Rhino

You have to admit that the example of how paying your loan of 15 years early means you will pay less in borrowings is very usefull....i had never realsied it was that simple! I'll be calling the bank on Tuesday and telling them to just wrap mine up by 2010....think what i'll save!

chrome

I always thought that it would mean that if you lower the term, obviously you save a fortune on interest long term, BUT you are then presented with enormous monthly payments (repayment mortgage) on a shorter term?

Or am I wrong?

I wish I could drop the term, but like ScoobyDoo555 says, people with families, and in my own case- a single income, just cant do that.

imlach

No, the repayments stay the same - it's just means you pay it off 15 years early. It really is that simple. Ask your bank.

(sorry, had to! - no offence meant! Yes, you are correct)

ScoobyDoo555

The financial version of Peter Kay's lose weight in a DAY

DAn

The Snug Rhino

Thats poor advice...shop around, you may find a bank that will offer you lower payments and lower term - dont just accept the first offer you are given.

imlach

Silly me. Yes, best to shop around. Some banks even offer 0% on interest only mortgages I've heard....

fast bloke

Based on your example, the paymets would jump from £600 a month to £1900 a month. Say Mr Bloggs earns 60k, PAYE, which would be in the ball park of £2900 per month after tax. Mr Bloggs has two kids and a wife. His hard costs are £1400 per month. He has the choice of spending £1500 a month on holidays, days out, nice cars, stuff, or ploughing it all into his mortgage. He will lose out on holidays with his kids for the next 5 years but his mortgage will be paid off in double quick time. Fast forward until Joe is on his death bed...... which quote will be realistic

1... I am glad I paid my mortgage off in 5 years.
2... I wish I had seen my kids growing up.

fast bloke

Can you post a link mate -I would love one of those

jasey

1... I am glad I paid my mortgage off in 5 years.
2... I wish I had seen my kids growing up.
3... Why did my wife leave me

Suresh

We have a 4x + income mortgage which we plan to increase simply because the net interest rate is less than we receive on our savings accounts!


For those not in such a fortunate position, liquid having savings probably give a feeling of security even if there is a cost Vs mortgage rates.

mattsan

Why dont you look at offset mortgages if you have savings in the bank? You can pay off your mortgage a lot quicker and pay less each month in payments...

Diesel

Shame some here have such problems communicating or sharing advice if they really do have some useful insight.

However as someone else says paying off say £20k a year in order to clear a £20k mortgage in 10 years = about £830 per month - ohh and theres the mortgage interest to pay too! This will be about the same amount per month, but will of course reduce over time. I can only think it poss for most peoplke if you forgo the nice car/hols/meals out/duck rounds/live on pot noodle etc

D

PS Suresh you seem to have a licence to print money!!! Are you accounting for tax on your interest here?

hades

Worked for a few years doing the sorts of overtime where I could have paid off the mortgage on a decent 4 bed detached by my mid-late 30s - but generally working 70 hour weeks right through the summer months. Am now working a different job at 37 hours. Hence less money, presently on track to pay the mortgage off (albeit on a £50k more expensive house) by the time I'm 50. Given the choice, (OK I'm not struffling at the moment, but certainly earning less) I'm much happier having normal hours and an enjoyable life than knowing I could pay the mortgage off earlier. Each to their own.

I do second the comments above about flexible/offset type mortgages though, I'm much happier knowing I have lots of cash available if I need it but it presently saving me £150/month in mortgage payments

imlach

An ujnhealthy obsession with paying off the mortgage early will also probably mean you're :

a) loathe to extend through remortgaging
b) loathe to move upwards for fear of a new mortgage

A mortgage is a pretty acceptable debt to have. It beats renting. Only if you carry a mortgage through to retirement should you be worrying more.

Akuma

Why is it an unhealthy obsession to want to pay off your mortage early?

My husband (31) and I (35) are attempting to pay off our mortage in less than a year.

Yep, I did say less than a year

We moved to the other side of the world and my husband works like a dog. But the salary is fantastic and we have a fully expensed package including a house to live in for the duration of the contract and all bills paid.

We're currently renting out the house (the one with the mortgage) in the UK for more than the monthly mortgage payments. (The house is a 4 bed detached on a new development)

We've moved to Japan for an 18 month contract, we're living a full and exciting life in a country we love, our 4 year old son is learning about a new culture & language. With a bit of hard work & a lot of saving, we'll be mortgage free at the end of the contract and if all goes to plan we'll also have some savings too.

I don't understand why it's so hard to grasp that some people don't want to pay a mortgage

Hubby may work like a dog, but he's taken 2 steps up the career ladder and he isn't bored like he was in his previous job. He probably gets more 'quality' time with his son than in the UK as we have less responsibilities here (no DIY etc) so the weekends are spent together as a family.

We're in this together as a couple & a family, and we have loads of things we want to do with our lives and we can't do them whilst paying off a mortgage and being tied to earning a certain amount of money each month.

If we can acheive paying it off early, then hubby can decide what he wants to do after the contract finishes. It just gives us freedom to choose what we want to do & where we want to go next.

We've always wanted to be mortgage free and in the 6 years of being married we've moved house (& sometimes country) 7 times - must be

In guess it just depends what you want from life - each to their own!