Should i Pay mortgage off? (advice/opinions please)

HoverOver

Looking for people's opinions on what to do in this situation (What's the smart decision financially...pay off mortgage .....partly pay it off...or hold onto your cash?)


Context:
Myself and my wife have took out a pretty substantial mortgage a few years ago:
400k for 35 years. So 4 years in, We've 31 years left.

Being eager to reduce the mortgage, Last year we split the mortgage to have a Variable Mortgage we could chip away at with savings as they built up.

So come today we have our mortgage split in 2, so essentially:
- The Variable Mortgage: 100k left on it (We never actually did chip away at it in the end, till now)
- The Fixed Mortgage: 275k left on it.


COVID-19 has struck and being conscious of a potential Recession coming from it and stock market crashing..... for better or worse, I made the decision to cash out stock I had built up from. (Which had already taken a bit of a hit due to the market crash to date )


So the question...

We now have 100k cash from the Stock.
And 40k of savings we already had prior to pushing the Sell button.

Is it's a 'no-brainer' to just pay the Variable mortgage off completely and trot along with savings?
Is there a more prudent option?
We are both relatively secure in employment (as secure as one can be for now, as we are part of large multinationals)

Anyways.... appreciate any input/suggestion.

Q&A

HoverOver wrote: »

Looking for people's opinions on what to do in this situation (What's the smart decision financially...pay off mortgage .....partly pay it off...or hold onto your cash?)


Context:
Myself and my wife have took out a pretty substantial mortgage a few years ago:
400k for 35 years. So 4 years in, We've 31 years left.

Being eager to reduce the mortgage, Last year we split the mortgage to have a Variable Mortgage we could chip away at with savings as they built up.

So come today we have our mortgage split in 2, so essentially:
- The Variable Mortgage: 100k left on it (We never actually did chip away at it in the end, till now)
- The Fixed Mortgage: 275k left on it.


COVID-19 has struck and being conscious of a potential Recession coming from it and stock market crashing..... for better or worse, I made the decision to cash out stock I had built up from. (Which had already taken a bit of a hit due to the market crash to date )


So the question...

We now have 100k cash from the Stock.
And 40k of savings we already had prior to pushing the Sell button.

Is it's a 'no-brainer' to just pay the Variable mortgage off completely and trot along with savings?
Is there a more prudent option?
We are both relatively secure in employment (as secure as one can be for now, as we are part of large multinationals)

Anyways.... appreciate any input/suggestion.

You seem to have a lot of bases covered. Right now that moneys not working for you. Paying down debt makes sense (you won't find a savings product that outweighs the cost associated with a mortgage). However, The one thing I would look at first is your pension position. It might make more sense to channel funds there first.

Lux23

I think I would pay 100k of the mortgage and hang to the 40k in savings, you have no idea what could happen in the next couple of years so that cushion could be helpful.

afatbollix

More than likely the tracker will go down in the next while as interest rates are cut. It's 0.1% in the UK. That will mean your tracker will more than likely go down.

If you can don't think of it as a total amount in the accounts but the interest rate of each mortgage.

As you could pay off the tracker on a 1% rate but your fixed is on 5%, It would make more sense to pay off 100k on the fixed in this case.

If you use the example above the 100k interest (1%) over the next 31 years will be e16,263
Whereas the interest on the fixed (5%) would be e266,799 over the next 31 years. (Or if you did it for just e100K it would be interest of e97,015)

Now I've made up the interest rates to get the point across but do check them.

Geuze

afatbollix wrote: »

More than likely the tracker will go down in the next while as interest rates are cut. It's 0.1% in the UK. That will mean your tracker will more than likely go down.

As the ECB's main refinancing rate has been 0% since March 2016, and even the COVID crisis has not caused them to cut it below zero, then you can expect it to stay at 0%.

https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html

Geuze

afatbollix wrote: »

More than likely the tracker will go down in the next while as interest rates are cut. It's 0.1% in the UK. That will mean your tracker will more than likely go down.

No mention of tracker in the OP.

...Ghost...

Geuze wrote: »

No mention of tracker in the OP.

Also OP mentions that the mortgage is 4 years in....so, tracker very unlikely.

Amirani

Pay off the variable is a no brainer here.

Maybe get a quote on a break fee for the fixed portion to see if it's worth paying off some of that too. As mentioned above, do you have a pension? If not then use some of the 40k towards that.

HoverOver

afatbollix wrote: »

If you use the example above the 100k interest (1%) over the next 31 years will be e16,263
Whereas the interest on the fixed (5%) would be e266,799 over the next 31 years. (Or if you did it for just e100K it would be interest of e97,015)

Now I've made up the interest rates to get the point across but do check them.

We're not on a tracker but interesting input thanks.... i need work it out.

The 100k is on the Variable at 4.2% currently...31 years left - works out at about €78k of interest.
100k applied to the 3% Fixed mortgage rate...31 years left - works out at about €54k of interest.

So no brainer to pay off Variable and don't touch the Fixed one?

Not sure am i working this out the right way.

HoverOver

That was my thinking too initially.

Amirani wrote: »

Pay off the variable is a no brainer here.

Maybe get a quote on a break fee for the fixed portion to see if it's worth paying off some of that too. As mentioned above, do you have a pension? If not then use some of the 40k towards that.

We'll probably build up savings to a cushion of 50K incase of a disaster/loss of employment.

Then we'll increase our contributions for pensions to 15%.
Currently just been doing the 5% minimum contribution.

Don't know if i'd consider paying lumps into pension...i prefer the idea of clearing debt (mortgage)

HoverOver

Thanks for the replies so far it's making me think of things i hadn't which was what the intention of the post was.

Sunrise_Sunset

I would recommend paying off the variable mortgage.
For how many years are you locked into the fixed rate? If you are locked in for say 5 years, you mightn't be able to make a payment on it right now without paying fees/penalties.

ted1

Are you happy in the house? Might you be looking to move or extend in the near future ?

I read Eoin McGees new book out and he calls mortgage a happy debt and uses his financial acumen to explain why. Have a look at some of his stuff on instagram as it answers your question very well and in an accessible way. His advice would be contrary to all others saying to pay off your mortgage early.

PHG

Hi OP,

If you an your partner have save up that amount fair play to both of you.

However, a 35 year mortgage is insane. We all say we pay down debt quicker e.g pay it down like a 20 year and rarely do.

Get rid of the Variable tonorrow and keep the 40k for Rainy day fund.

An example, and overpayment of €50 pm (depending on your plan) would saving you €11000 in interest and reduce your mortgage byb2 years.

When you can refinance to a shorter term, your LTV will be good so you may get a better rate and pay a lot less over the life time of mortgage.

Whoever your broker was, never use them again!

Oral Surgeon

HoverOver wrote: »

Looking for people's opinions on what to do in this situation (What's the smart decision financially...pay off mortgage .....partly pay it off...or hold onto your cash?)


Context:
Myself and my wife have took out a pretty substantial mortgage a few years ago:
400k for 35 years. So 4 years in, We've 31 years left.

Being eager to reduce the mortgage, Last year we split the mortgage to have a Variable Mortgage we could chip away at with savings as they built up.

So come today we have our mortgage split in 2, so essentially:
- The Variable Mortgage: 100k left on it (We never actually did chip away at it in the end, till now)
- The Fixed Mortgage: 275k left on it.


COVID-19 has struck and being conscious of a potential Recession coming from it and stock market crashing..... for better or worse, I made the decision to cash out stock I had built up from. (Which had already taken a bit of a hit due to the market crash to date )


So the question...

We now have 100k cash from the Stock.
And 40k of savings we already had prior to pushing the Sell button.

Is it's a 'no-brainer' to just pay the Variable mortgage off completely and trot along with savings?
Is there a more prudent option?
We are both relatively secure in employment (as secure as one can be for now, as we are part of large multinationals)

Anyways.... appreciate any input/suggestion.

IF you had 100k in stocks would you consider putting that back into the stock market and get a decent return as the market lifts in the next few years??

HoverOver

Sunrise_Sunset wrote: »

I would recommend paying off the variable mortgage.
For how many years are you locked into the fixed rate? If you are locked in for say 5 years, you mightn't be able to make a payment on it right now without paying fees/penalties.

Yeah we locked the Fixed in for 3 or 4 years a year ago when we split the mortgage. So you're right we'd need wait till that time passes before splitting again. Which to be honest is fine, we can use the time till then to try build up savings/stock and repeat this process (this was the thinking all along just to knock bits off it and pay mortgage off sooner than the original term it was taken out for)

HoverOver

ted1 wrote: »

Are you happy in the house? Might you be looking to move or extend in the near future ?

Yes quite happy in it. We're only in 4 years.. but it's ideal in terms of facilities/location our needs right now.

In time should kids come alone we'd love 1 extra room...

but in terms of moving house...that'd be years away.

I reckon 5+ years here before we'd consider moving to something with an extra room. And by then hopefully we'll have built up savings/stock again like we have over the last 4 years. (maybe naive as the cost of kids could come in like a plan wrecking ball haha )

HoverOver

PHG wrote: »

Hi OP,

If you an your partner have save up that amount fair play to both of you.

However, a 35 year mortgage is insane. We all say we pay down debt quicker e.g pay it down like a 20 year and rarely do.

Get rid of the Variable tonorrow and keep the 40k for Rainy day fund.

An example, and overpayment of €50 pm (depending on your plan) would saving you €11000 in interest and reduce your mortgage byb2 years.

When you can refinance to a shorter term, your LTV will be good so you may get a better rate and pay a lot less over the life time of mortgage.

Whoever your broker was, never use them again!

Bank Of Ireland was the Mortgage provider/adviser.
The idea was 'get as much a mortgage as you can over as long a period as you can so that we could have lower monthly repayments'.

Our repayments up to now have been like 1700/month which aren't great. If we pay off the variable, they'll come down to about 1100/month which is better particularly in the case of a job loss or 1 of us not working.


For sure we will be able to afford higher repayments and might consider that...but we can only do that i think when our 275k Fixed mortgage term (3 years left) comes up and then i think we'll either split out some again into a Variable so pay off more chunks... or up our repayments...or a bit of both.

HoverOver

Oral Surgeon wrote: »

IF you had 100k in stocks would you consider putting that back into the stock market and get a decent return as the market lifts in the next few years??

Oh i don't know.... only if the market crashed hard with a recession and shows signs of picking up maybe.

and likely not with this 100k because this 100k if it gets rid of the Variable will mean much more manageable monthly repayments.

Maybe with future savings/stock i'd consider learning to play the stock game. I'm pretty risk averse though

PHG

HoverOver wrote: »

Bank Of Ireland was the Mortgage provider/adviser.
The idea was 'get as much a mortgage as you can over as long a period as you can so that we could have lower monthly repayments'.

Our repayments up to now have been like 1700/month which aren't great. If we pay off the variable, they'll come down to about 1100/month which is better particularly in the case of a job loss or 1 of us not working.


For sure we will be able to afford higher repayments and might consider that...but we can only do that i think when our 275k Fixed mortgage term (3 years left) comes up and then i think we'll either split out some again into a Variable so pay off more chunks... or up our repayments...or a bit of both.

I can see why you did that but never go straight to the bank, they are selling their product. I used to work in Banks during University (a while ago now) and trust me the ones selling don't have a notion and trying to meet a target. use a broker or minimum meet with one before BoI ring you about renewal. When is your fixed rate up?

If you pay off variable, why not "pretend" you are still paying the 1700 and put the 600 each month you are no longer paying into a savings account. When the fixed rate is up (and hopefully you are both still in employment) put that towards the mortgage. Could knock a load off future interest payments and if you can do an over payment monthly , amazing! You could knock 10 years off it and still live the same lifestyle as now. E.g an overpyamnt of 100 per month still leaves you 500pm better off than now.

I'm not giving out about the above, you are both in an amazing financial position and the 100k in stocks is incredibly enviable to anyone. I am just a keyboard warrior

Sunrise_Sunset

HoverOver wrote: »

Yeah we locked the Fixed in for 3 or 4 years a year ago when we split the mortgage. So you're right we'd need wait till that time passes before splitting again. Which to be honest is fine, we can use the time till then to try build up savings/stock and repeat this process (this was the thinking all along just to knock bits off it and pay mortgage off sooner than the original term it was taken out for)

Our mortgage is split similarly. We have the majority of it on tracker and then we borrowed another few k when we upgraded so that's on a 5 year fixed rate. Although my fixed rate is higher than my tracker rate, I make overpayments on both. The overpayments on the fixed account, sit as credit on the account and when the 5 years is up, I can use it to make the overpayment. With the tracker I overpay each month, and again it sits on the account, but once a year or so I plan to use this credit to make the overpayment. This is how PTSB does it anyway. If I had a lump sum like yourself, I would clear down the portion of the mortgage that I could.

HoverOver

PHG wrote: »

I can see why you did that but never go straight to the bank, they are selling their product. I used to work in Banks during University (a while ago now) and trust me the ones selling don't have a notion and trying to meet a target. use a broker or minimum meet with one before BoI ring you about renewal. When is your fixed rate up?

Yeah fair point ... to be honest at the time we were just rushing to get a house. We weren't seriously looking/considering buying till herself found the house and it made sense at the time to stop renting and buy before the future phases in the development went up. We put the deposit down without even having mortgage approval so we rushed through it with BOI with fingers crossed we could get approval and the sale wouldn't fall through.

The Fixed Rate mortgage has 3 or 4 years left on it. 3 i think. (need fish out the paperwork for that detail)
Will consider a broker down the line.

PHG wrote: »

If you pay off variable, why not "pretend" you are still paying the 1700 and put the 600 each month you are no longer paying into a savings account. When the fixed rate is up (and hopefully you are both still in employment) put that towards the mortgage.

Yeah that's the plan really. Try live as if still paying the larger monthly amount. Covid is helping with saving ha....silver lining i guess!

dotsman

Hi Op, sorry to be the bearer of bad news, but I'm afraid you have being doing things aresways!

You cashed in your investments after the stock market crashed. That is the complete opposite to what you are supposed to do! All you did was capitalise the losses. Fro example, if that 100K was cashed in during March, it could easily be worth 120K-130K by now (just 2 months later!). Remember, the idea is to buy low, sell high;)

As for using that to pay off your mortgage, you haven't mentioned the most salient point anywhere in your post - "Why you want to over pay your mortgage".

If you are in negative equity, or nearing retirement etc then there can be a good reason, but the last thing you should do is overpay your mortgage just for the sake of it. There are nearly always far better things to do with your money.

Over time, you will make far, far more money on the stock market (as long as you resist the urge to sell whenever there is a dip - that's when you buy more!) than you will in overpaying your mortgage. That is where the 100K should be.

The 40K should be kept in deposit for easy access (possibly reduce to 20-30K and add the rest to your investment account), but it really depends on your personal circumstances which is outside the scope of this thread.

Now, as for your mortgage itself, you are completely with the wrong bank. BOI are ripping you off completely. If you really want to save money on your mortgage, you will save far more money moving to a different bank than you would overpaying your mortgage. At 4.2%, BOI are having a laugh. At a high LTV which I assume you have, you should be expecting to pay circa 3% on the variable rate. That's a grand a year you can save right away. In terms of Fixed Interest, again there are cheaper. Also, bear in mind that banks are currently competing on Fixed interest, but it probably won't last forever, so rahter than just move to "whatever bank is the cheapest today", it is important to consider what bank is likely to have the cheapest rates in the medium term future. Over the past decade (and more at this stage), AIB have been consistently one of the cheapest banks out there for mortgages (while BOI has always been, by far, the most expensive). When dealing with such a large value loan, the slightest of differences in interest rates can mean thousands per annum. Check out https://aib.ie/our-products/mortgages/mortgage-interest-rates

HoverOver

dotsman wrote: »

Hi Op, sorry to be the bearer of bad news, but I'm afraid you have being doing things aresways!

You cashed in your investments after the stock market crashed. That is the complete opposite to what you are supposed to do!

All you did was capitalise the losses. For example, if that 100K was cashed in during March, it could easily be worth 120K-130K by now (just 2 months later!). Remember, the idea is to buy low, sell high;)

I get but rationale but right now no-one has a crystal ball to say this is just a lull and that it will recover to pre-covid times. I decided it's not 100k worth of stock i was willing to potentially see halved or worse in the hopes:
A) there's no recession and it returns to pre-covid times quickly, or
after however many years a recession (the last one was 10? years)...the stock recovers back to pre-covid.
I've seen companies and stock disappear on people where they've lost all their nest eggs.


Prior to covid our stock was doing well/maintaining its value....At Christmas our shares would have been worth 120k.
In March Covid had it down to 56% it's previous value at 67k.
I sold when it recovered to 83% of the value, at 100k.
Since i sold it's gone gone again a bit (just a couple of percent)

But I took a bet that a recession will indeed come and in the end this was the wise choice for me at the time considering my desire to thin down our mortgage debt to make repayment easier for when kids come alone or god forbid we have our income reduced....

The way my salary is based i get stock vestings each quarter so it'll build up again over the next 2-3 years, so that's a silver lining. At least it's not money i invested myself. Stock feels like fake money until it's cashed out really.

dotsman wrote: »

As for using that to pay off your mortgage, you haven't mentioned the most salient point anywhere in your post - "Why you want to over pay your mortgage".

If you are in negative equity, or nearing retirement etc then there can be a good reason, but the last thing you should do is overpay your mortgage just for the sake of it. There are nearly always far better things to do with your money.

Over time, you will make far, far more money on the stock market (as long as you resist the urge to sell whenever there is a dip - that's when you buy more!) than you will in overpaying your mortgage. That is where the 100K should be.

I touched on it above - just for security really in the event of reduces income for me or my other half. Paying off the 100k of our Variable mortgage and only having the fixed left leave us in a place where we can really comfortably live on a single salary for the remainder or our Fixed term mortgage.

Also i guess if the house if worth more than the remainder of our mortgage, we'd avoid the potential for negative equity.

dotsman wrote: »

The 40K should be kept in deposit for easy access (possibly reduce to 20-30K and add the rest to your investment account), but it really depends on your personal circumstances which is outside the scope of this thread.

Yep fair, we have ideas that keeping a backup savings pot of 50k would be good to have. 20-30 i agree is plenty but we're just being overly cautious i guess.

dotsman wrote: »

Over time, you will make far, far more money on the stock market (as long as you resist the urge to sell whenever there is a dip - that's when you buy more!) than you will in overpaying your mortgage. That is where the 100K should be.

The 40K should be kept in deposit for easy access (possibly reduce to 20-30K and add the rest to your investment account), but it really depends on your personal circumstances which is outside the scope of this thread.

I guess it comes down to how willing are we to play the stock game longterm, and being comfortable with debt, which at the previous size of our debt...we weren't comfy with.
Also I've seen people not being able to pay off mortgage until their late 60's because their stock went to nothing. So am trying to learn from that.

dotsman wrote: »

Now, as for your mortgage itself, you are completely with the wrong bank. BOI are ripping you off completely. If you really want to save money on your mortgage, you will save far more money moving to a different bank than you would overpaying your mortgage. At 4.2%, BOI are having a laugh. At a high LTV which I assume you have, you should be expecting to pay circa 3% on the variable rate. That's a grand a year you can save right away. In terms of Fixed Interest, again there are cheaper. Also, bear in mind that banks are currently competing on Fixed interest, but it probably won't last forever, so rather than just move to "whatever bank is the cheapest today", it is important to consider what bank is likely to have the cheapest rates in the medium term future. Over the past decade (and more at this stage), AIB have been consistently one of the cheapest banks out there for mortgages (while BOI has always been, by far, the most expensive). When dealing with such a large value loan, the slightest of differences in interest rates can mean thousands per annum. Check out https://aib.ie/our-products/mortgages/mortgage-interest-rates

This is super to now thank you! when our fixed mortgage is up i'll be sure to check the landscape with brokers.

Appreciate your input ty

Henry Ford III

Interesting dilemma and not the worst position to be in either OP.

Money is historically cheap so servicing a loan makes sense, and you've shown you have the income and repayment capability to do so.

You've made your decision on cashing in your investment, and there's no more to be said on that as it's done.

With all that in mind if you could earn more than say 5% on your cash you'd be better off doing so than paying down debt. Assuming you are paying the higher rate of tax surely the 40% tax relief on pension contributions must be attractive?

It's also not too easy to save a lump sum,so I'd be slow to use savings to pay down debt. Keep it as rainy day money?

Might be worth your while to find and pay a professional to put together something on the pensions side?

antimatterx

Can I ask, did you have individual stocks purchased or an index fund?

HoverOver

antimatterx wrote: »

Can I ask, did you have individual stocks purchased or an index fund?

Can't say i know what an "index fun" is....

I just get stock through work. I work in a global IT company that structures their renumeration like this:

1. Salary: Each year you have an annual review and you might get a nominal (1-5%) increase of your Salary if you're doing well/hitting targets.
I'm in the 80-90k range salary.

2. Stock: You also get a Stock Grant with a 4 Year Vesting Period.
After 1 Year you get 1 full quarter of the previous years vesting. (4/16ths of the full Stock Grant)
Each quarter from then on you get 1/16th until you receive the full grand upon 4 years.
You get these Stock grants each year so as the years go on they compound/add up to multiple vestings each quarter.
Each year i get awarded about 65k of stock.

cooperguy

HoverOver wrote: »

I get but rationale but right now no-one has a crystal ball to say this is just a lull and that it will recover to pre-covid times. I decided it's not 100k worth of stock i was willing to potentially see halved or worse in the hopes:
A) there's no recession and it returns to pre-covid times quickly, or
after however many years a recession (the last one was 10? years)...

Assuming you bought at the absolute peak before the last recession (which is unlikely then or before COVID now) it would have taken 5 years to recover. Assuming you didnt buy anything during the recovery and profited from that as well.

dotsman wrote: »

As for using that to pay off your mortgage, you haven't mentioned the most salient point anywhere in your post - "Why you want to over pay your mortgage".

If you are in negative equity, or nearing retirement etc then there can be a good reason, but the last thing you should do is overpay your mortgage just for the sake of it. There are nearly always far better things to do with your money.

Are there not many different investment horizons though. For very long term investments you have pension funds. You might also want slightly more liquid stocks etc. that you might want to cash in before retirement.

But you might also have a target of needing money in, say, 15 years to help put kids through college. If you cleared your mortgage you would have freed up a lot of cash flow every month to do that. And in the process you would have saved thousands in interest, tax free, and almost risk free. Is that really a bad approach?

PHG

You should probably have held tight on the investment, selling when things are falling is not a great idea and things will recover.

PHG wrote: »

Hi OP,

If you an your partner have save up that amount fair play to both of you.

However, a 35 year mortgage is insane. We all say we pay down debt quicker e.g pay it down like a 20 year and rarely do.

Get rid of the Variable tonorrow and keep the 40k for Rainy day fund.

An example, and overpayment of €50 pm (depending on your plan) would saving you €11000 in interest and reduce your mortgage byb2 years.

When you can refinance to a shorter term, your LTV will be good so you may get a better rate and pay a lot less over the life time of mortgage.

Whoever your broker was, never use them again!

Always get the maximum term, it is very poor financial management not to you then always have the option to overpay and to fall back on a lower payment.

As for brokers, imo they are for people who don’t understand things themselves. Much better to deal directly with the bank personally I wouldn’t go near a broker.

PHG

Eli Fat Gravy wrote: »

You should probably have held tight on the investment, selling when things are falling is not a great idea and things will recover.



Always get the maximum term, it is very poor financial management not to you then always have the option to overpay and to fall back on a lower payment.

As for brokers, imo they are for people who don’t understand things themselves. Much better to deal directly with the bank personally I wouldn’t go near a broker.

That is nonsense and would classify it as a poor financial decision to do so.

The chances of paying off the debt earlier than the term you get is minimal. Very few people overpay but still get the long terms with the idea of overpaying and don't. It then costs them a lot more in interest. The longer your term the more chance you will be hit by financial instability and unexpected costs which accounts for stress, anxiety and uncertainty, particularly the older you get.

Then there is the opportunity cost of paying it off early and putting the payment into a pension, simply enjoying more of life or maybe being able to retire early. Plus most people need some sort of kick/incentive to pay extra, as it is too easy to leave it be and put it off each month.

The difference in a 35 v 25 year payment and ]is approx. 300 a month which is not huge either.

You are looking at everything remaining constant and not factoring what can happen over 35years vs 25 years. Ask someone who paid off their mortgage by 60 instead of 70 and I guarantee you the 60 year old will likely have had 10 years less of stress.

antimatterx

PHG wrote: »

That is nonsense and would classify it as a poor financial decision to do so.

The chances of paying off the debt earlier than the term you get is minimal. Very few people overpay but still get the long terms with the idea of overpaying and don't. It then costs them a lot more in interest. The longer your term the more chance you will be hit by financial instability and unexpected costs which accounts for stress, anxiety and uncertainty, particularly the older you get.

Then there is the opportunity cost of paying it off early and putting the payment into a pension, simply enjoying more of life or maybe being able to retire early. Plus most people need some sort of kick/incentive to pay extra, as it is too easy to leave it be and put it off each month.

The difference in a 35 v 25 year payment and ]is approx. 300 a month which is not huge either.

You are looking at everything remaining constant and not factoring what can happen over 35years vs 25 years. Ask someone who paid off their mortgage by 60 instead of 70 and I guarantee you the 60 year old will likely have had 10 years less of stress.

It's not poor financial advice, he's spot on. Take the longest possible term, always.

It will both, allow you to overpay if possible, or have more disposable income to invest and make a greater return than the interest paid on the mortgage.

Sheep_shear

We took a long term (33 years) for our mortgage. We could easily have taken a shorter one but given that this is our first purchase and there were so many unknowns for us cost-wise, I preferred having the option of a lower payment. We're overpaying a bit but it's nice to know that if things turn south, then there's some movement there.

PHG

PHG wrote: »

That is nonsense and would classify it as a poor financial decision to do so.

The chances of paying off the debt earlier than the term you get is minimal. Very few people overpay but still get the long terms with the idea of overpaying and don't. It then costs them a lot more in interest. The longer your term the more chance you will be hit by financial instability and unexpected costs which accounts for stress, anxiety and uncertainty, particularly the older you get.

Then there is the opportunity cost of paying it off early and putting the payment into a pension, simply enjoying more of life or maybe being able to retire early. Plus most people need some sort of kick/incentive to pay extra, as it is too easy to leave it be and put it off each month.

The difference in a 35 v 25 year payment and ]is approx. 300 a month which is not huge either.

You are looking at everything remaining constant and not factoring what can happen over 35years vs 25 years. Ask someone who paid off their mortgage by 60 instead of 70 and I guarantee you the 60 year old will likely have had 10 years less of stress.

You are incorrect, any person giving sound financial advise will tell you to take the longest term possible as it is a very big safety net if needed while you can still overpay. Loads of people over pay also so don't know why you its not common.

Even if you dont overpay having a lower mortgage payment may enable you to be more comfortable in living your life, have more disposable income or save more for the future. Yes the mortgage will cost more over the longer term but it is worth it compared to spending year under pressure to meet a higher monthly repayment and not being able to live a bit too.

Busman Paddy Lasty

Sheep_shear wrote: »

We took a long term (33 years) for our mortgage. We could easily have taken a shorter one but given that this is our first purchase and there were so many unknowns for us cost-wise, I preferred having the option of a lower payment. We're overpaying a bit but it's nice to know that if things turn south, then there's some movement there.

Did the same here. Took 35 year term as a contingency until we got better jobs, I was on a 3 month contract at the time. Secure jobs now and we can afford to pay almost double our basic payment which reduces our term to 16 years. Overpayment can be cancelled at no cost to us should our circumstances change.

To the OP take professional advice from a risk management perspective. That 100k variable mortgage over 30 years has a 76k cost of credit. I would pay that off next Tuesday!

If your optional investment can out perform that 76k cost over 10 years you'll still have paid a lot of interest on a monthly basis over that time. No need to double expose yourself to the market (my opinion) as you are earning share rewards in work.

Good luck, have a nice life. Compound interest and stress are harsh mistresses.