I paid off my mortgage early

A man who spent six years paying off his home loan early has shared how he regrets becoming mortgage-free.

The 35-year-old man and his wife put all their savings into paying off their mortgage earlier than planned, hitting their goal two years ago.

Paying off your mortgage can leave you without cash when you need it


Paying off your mortgage can leave you without cash when you need itCredit: Getty

The move freed up the cash they spend on dining out, on vacations and on car purchases.

Instead of paying off their mortgage, they have around £900 a month to “live a more carefree lifestyle”, he said in a Reddit post.

But a change in circumstances after the hit of Covid made him regret it early loan payments.

Now that this couple has one child, there is nothing left to return as all their money is tied up tightly to the property.

Speaking to the UK Personal Finance forum, the owner, who did not want to be named, said: “We moved into a larger property in March of this year and took out a relatively modest mortgage again.

“My wife was unemployed during the first Covid lockdown and decided to try her own business.

“Had our first child in August, living on single salary plus SMP [statutory maternity pay] With a mortgage, I wish we were more financially savvy and invested a larger percentage of our disposable income.

“Ultimately we have no real savings right now and a little monthly deficit.”

Looking back, he believes they’re better off investing some of their cash after they’ve fixed the mortgage rate for two years at just 1.69%.

He did not say the amount of the mortgage nor the value of the property.

They had previously done a 5-year fixed deal in 2012 at 4.99%, but repaid most of the cash when they were at a lower interest rate.

“Certainly there are a lot of people who are worse off than we are, but at the same time we would probably be a lot better off if we didn’t just pay off our first mortgage.” he say.

“Life is pretty challenging right now when perhaps it’s not necessary.”

He added that he would probably “go down a slightly different path” if he noticed some advice in the forum about “paying off debt and investing your savings”.

“All that being said, we could get out of the current squeeze by releasing equity from our current assets but haven’t done so yet,” he added.

“Maybe deep down despite knowing the best financing option is probably investing, I’d like to be mortgage-free again.”

Should you pay off your debt early?

Laura Suter, head of personal finance at AJ Bell, says anyone thinking of paying off a mortgage early should think twice and follow some golden rules.

“It’s important to remember that once the mortgage is paid off it’s very difficult to get that money back, you need to get a new mortgage to free that money out of your home,” she said. you – so think through it before you make a decision.”

Homeowners should prepay other expensive debts such as credit cards, overdrafts, and hoarding cards.

When paying off debt, you should pay the highest interest rates first so you don’t waste interest.

It also makes sense to save some cash for emergencies.

Working couples should have at least £11,000 to survive six months of unemployment, experts warn.

Homeowners should also check to see if they’re getting the lowest mortgage rate possible, regardless of whether or not they plan to pay it off early.

For those who decide to target no mortgage, staying at a low interest rate means overpayments will go toward paying off actual debt rather than interest, Ms. Suter said.

“Once you’ve covered all of these needs, you need to decide if your priority is getting rid of your mortgage or you want to accumulate more savings,” she says.

“With mortgage rates so low right now, it’s likely you won’t have to pay too much interest on your debt, so you may decide you can make more money by investing your cash.” .

“Conversely, you might think the mortgage-free milestone is more important to you.”

However, savers should be careful keeping all their money in cash, as savings interest rates are at record lows, and inflation above 5%, can eat away at your money over time. .

If you’re not investing cash, you’re better off paying off your mortgage.

What’s more, over the longer term, those who invest their money benefit from the beauty of compounding, which means the interest rate generated can be higher than the rate you save by paying pay off your mortgage.

Things to check before overpaying your mortgage

If you decide that you want to pay off your mortgage, a few things need to be checked first.

Most mortgages have stipulations on how much you can overpay — and they can even be a penalty to pay if you get it wrong.

It’s best to check the terms of your mortgage or ask your lender before you start overpaying.

“Most mortgage companies allow you to pay up to 10 per cent of your balance a year, although some allow more,” says Ms. Suter.

She adds that another option if you still need a mortgage again, is to “reduce the term on your mortgage, which increases your monthly payments and effectively locks in overpayments.” level and cut the overall interest you pay”.

“Whoever chooses this path needs to make sure they won’t need access to money for anything else.”

Overpaying your mortgage by as little as £50 a month could save you thousands of pounds in the long term.

MoneySavingExpert’s free online calculator can help you figure out how much you can save if you overpay on your mortgage.

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