Paying off your mortgage can feel like an impossible dream.
The sums involved are so huge. With house prices so high, most people have to borrow enormous amounts to get a toehold on the housing ladder. Typically, mortgage loans last for 25 years, but nowadays you can stretch them right out to 40.
For most homeowners, their mortgage is their biggest bill each month. That’s a hefty chunk of cash disappearing from your current account, month in, month out, for decades.
But imagine clearing your mortgage. Shedding that burden. Using the money for something else.
I thought about this recently, because a friend paid off her credit card debt, freeing up money previously used for repayments. The question came up about whether to use the spare money to invest, or towards her mortgage.
Right now, mortgage rates are much lower than historic returns from investing. On paper, the choice is clear: invest those extra pounds rather than paying off mortgage debt. If your mortgage rate is only 2% but you might earn more than 5% by investing, head straight for the stock market!
Trouble is, those numbers are not set in stone. I’m a big fan of investing, but there’s no guarantee that mortgage rates won’t rise, and there’s always a risk that investments might plummet. But if you clear your mortgage, no-one can take your home away.
Personally, as someone in the incredibly fortunate position of having paid off their mortgage, I reckon the decision is more emotional than financial. It’s not just about the numbers. It’s also about how you feel.
Short of a lottery win or massive inheritance, clearing a debt as big as a mortgage takes a long time and a lot of work. So holding on to the dream of what it might feel like, clinging to the vision of living mortgage-free, is particularly important.
Here’s what it feels like to me:
Safety from life’s uncertainties
Shedding our mortgage brought a huge sense of safety and security. No-one can take away the roof over our head. It’s ours.
Perhaps everything is going swimmingly, with no problems paying your mortgage.
But few of us skate through life completely unscathed by illness, unemployment or relationship breakdown. If your income stopped, how many months could you carry on with your mortgage payments?
Can’t get stitched by rising interest rates
Right now, interest rates have been at historic lows for 10 years. That’s brilliant for borrowers, but it also means the only way is up.
Currently, you can find Best Buy mortgage deals for less than 2%. That’s tiny!
I’m old enough to remember my parents stressing when mortgage rates hit 15%. Rates soared so high so fast that thousands of people lost their homes, unable to afford the repayments.
I don’t have a crystal ball. I can’t predict when rates might rise, and how high. But I do know that making a dent in your debts is much easier when rates are low, and that clearing our mortgage means I’m not afraid of bigger bills in future.
Can’t get trapped by changing mortgage rules
Back in the 2000s, I used to write articles encouraging people to remortgage at the drop of a hat.
Come to the end of a mortgage deal? Don’t get stuck on your lender’s standard variable rate, hop onto a new deal and save a ton of cash. Mortgage companies were handing out money right, left and centre. Make a quick call, and it’s all done and dusted.
Right up until it suddenly stopped, broken by the credit crunch from 2007.
Nowadays, mortgage rules are way tighter. You can’t borrow so much. You may need a bigger deposit before you can borrow. You need to show much more evidence of how you can afford repayments, sharing bank account data, ‘fessing up about child care costs, with greater proof of income. People who merrily hopped from one remortgage to another got stuck when the music stopped. Almost 150,000 ‘mortgage prisoners’ are trapped on higher rates, unable to nab new loans under tighter rules.
So I know that mortgage companies can move the goal posts, and turn off the tap of cheap money. Paying off our mortgage means I never need to worry about rule changes breaking our budget.
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Freedom to choose different jobs
I stuck with my first job way longer than I would have liked, so I could qualify for a mortgage on my first flat.
But borrowing less, and then clearing our mortgage completely, gave my husband and me the freedom to pursue different careers. With lower bills, we could get by on less money. We weren’t trapped in jobs just to meet our mortgage.
Back in London, I was able to go freelance after maternity leave. Ploughing money into overpayments meant we had a smaller mortgage, so I wasn’t forced to return to a full-time salary.
Moving to Suffolk, and shedding our mortgage completely, meant my husband could go back to working for the charity sector, with shorter hours and less stress. I could continue working as a freelance journalist and then blogger, with variable income and no worries about whether my accounts would meet stricter rules on borrowing by the self-employed. We could both spend more time with our children.
Freedom to use that money elsewhere
My husband and I made the choice to free up time, rather than extra cash, once we paid off our mortgage.
But if you’re happy to stay in the same jobs, slaying your mortgage leaves you with spare money. Suddenly you can choose whether to splash the cash on clothes, holidays and home improvements, salt it away in investments and pensions or hit some happy medium.
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I’m going to fly the flag for marital harmony.
Money worries are regularly identified as a leading cause of marriages splitting up. Paying off your mortgage removes a massive chunk of that financial pressure (even if it won’t do anything about say snoring, or eating cereal in a particularly irritating way).
For my husband in particular, the only good mortgage is no mortgage at all. So he’s definitely much happier living mortgage free!
Clearing our mortgage has given us safety, security, freedom and less stress. No sleepless nights worrying where the mortgage money will come from. No ‘what ifs’, concerned about future rate rises, rule changes or the uncertainty of investment performance.
A true entrepreneur might prefer to seize cheap money while they can, borrow up to the hilt, and invest elsewhere.
Personally, paying off our mortgage brought enormous peace of mind. To us, that’s priceless.
Now – over to you. What would it feel like to pay off your mortgage? What are the benefits, if you already have? Do share in the comments, I’d love to hear!