Boring Boring Mortgages

So that endowment plan I took out as a young newly wed didn't turn out to be the smartest idea ever.  Always good to save eh ? Hmmm....

So the mortgage period is up and we are 29k short. It's not a disaster but not brilliant.

Both nudging 50 and should be setting aside more for our retirement than whacking out another 10 years of mortgage payments I guess.

I have some saving so could pay off some of the outstanding balance but I don't think that's advisable is it ? Isn't a mortgage the cheapest way to borrow money ?

Anyone else been in this situation and what did you do ?  I can't see theres much choice but to extend for another decade, but maybe someone knows better.

Thanks runners.

Comments

  • Disclaimer - I am in no way qualified to offer financial advice so please don't beat me up if what I say results in you ending up destitute and living in a cardboard box.

     

    A mortgage is the cheapest way to borrow money but the interest rate is still higher than you can earn by having that money in a savings account.  So as long as you will still have some savings for a rainy day (and without knowing anything else about your finances) it probably makes sense to pay off the mortgage.

  • MuttleyMuttley ✭✭✭

    Same disclaimer as Mr W.

    Doesn't matter how cheap it is to borrow, a debt is a debt. My own personal experience is that the personal finance industry consists of scams and spivs and the best way to borrow is a straightforward loan, paid off asap.

    Keep enough money saved for emergencies and use the rest to overpay or pay off. Interest rates are at an historic low so you should be taking advantage of that to get rid of what you owe. No charge on your house means it's all yours.

    The financial crash was a disaster for many but for me it was a godsend - I shifted my mortgage in half the term and saved a fortune. Now mortgage-free at 56 and could retire if I wanted.

  • I like your thinking there.  I might hedge my bets and pay half of it off to lower the term.  And yes - I don't trust Financial types either Muttley.  

    We have so many insurance policies - I'm sure we'd have been better just saving all that cash for a rainy day. 

  • rates will go up in the next few years,.....

    and they are not offering great deals on mortgages as they were pre financial crash....

    Our mortgage rate is only 0.79% .... no chance of ever getting a rate that low again..

    so unless your savings are getting better returns than the mortgage rates then i would pay it off and at least know you are debt free...

    I am lucky that I have always distrusted financial advisers..so even in 1989 when I got my first mortgage I never let the salesman persuade me to get an endowment even though he was telling me I was mad to go for a repayment

  • senidMsenidM ✭✭✭
    As an ex-banker (not the high street type) I can have some sympathy with your original advisor - back when, fifties, sixties, and seventies, endowment was the way to go, and I paid my mortgage off with a substantial surplus, not much consolation to you Rick, sorry.



    But above advise is good, if your'e mortgage rate is higher then the interest rate you get on your savings, pay the mortgate off. But if you can re-negotiate the mortgage over the next 10 years at a good rate, i.e. lower than interest rates being offered (unlikely?) then go for that.



    You can ask an "expert", but actually there's no such thing, just some get luckier than others.
  • NessieNessie ✭✭✭

    I'm with the others - pay off what you can comfortably afford and have the lowest amount in a mortgage. 

    There aren't so many around at the moment, but you could also look for offset mortgages, which means you could keep your capital available but only pay interest on the difference between your mortgage and your savings. But the mortgage rate might not be as good, so proceed with caution.

    Interest rates aren't likely to increase until Q1 2017 at the earliest, so you are unlikley to get a return on savings worth talking about, so paying out 1-2% for a mortgage seems a bit daft.

  • Go and see a financial adviser. Do you have access to a company pension scheme and are you making contributions already? If not you may be missing out on employer contributions which are, in effect 'free money'. Also, aged 50, you may be restricted in the mortgage providers you can use - since you took out your first mortgage the rules on how lenders have to assess affordability have changed and some will not give you a loan that will extend into your retirement. Even if you just go for an initial chat an independent adviser will be able to flag up things you might not have taken into account.

    (And no, I'm not a financial adviser either)

  • depends on the size of the employer and the pension scheme.....the newest ones the workplace solutions.....are a time bomb waiting to go off.it could well be the next misselling scandal.....some have high fees, no guarantees and are badly organised......

     

  • RicFRicF ✭✭✭

    Bloody endowment mortgages. Crap product!

    Better to have a repayment mortgage and put the saving aspect into a pension fund; at least there would be an instant 20% return on the investment.

    If people bothered to study finances beyond earning and spending their wages, then maybe they wouldn't head towards old age complaining they have been 'done'.

    It's personal responsibility of the highest order.

    Money. The cornerstone of your existence whether you like it or not.

     

  • JazzijJazzij ✭✭✭

    It may be difficult to get a mortgage on less than 25k, so see an adviser before paying any off.

  • Thanks chaps. Dave - one day I hope to be able to say the same !image

  • DustinDustin ✭✭✭

    There is also a school of thought that a mortgage can be seen as a cheap loan.
    I agree that if you leave capital in a "savings" account or ISA you are better off paying down the mortgage. However if you invest spare capital in higher returning investments (corporate bonds, equities etc.) then you can more than recoup the 4-5% APR that a long term fixed rate mortgage costs.

  • NayanNayan ✭✭✭
    In your shoes, if I was reasonably sure i wouldnt need the money for anything (holidays, operations, giving your kids money towards a house)...



    ...I'd pay down the mortgage. reason being the money you save in interest beats any after tax guaranteed return you could make on the money.



    it also helps secure the roof above your head.



    I I had expenses coming up

    if keep a little rainy day money back for that.
  • RicFRicF ✭✭✭

    As usual I forget all about the content of previous posts.

    I've been reading a load of stuff about whether or not people consider themselves 'wage slaves', and if 'Baby Boomers' are really responsible for the current financial conditions.

    An underlying pattern emerges that indicates that the wealth accumulated and made by the middle classes was historically speaking, an aberration. Throughout history the normal situation was the vast majority of wealth was held by only 1% of the population.

    It's going that way again in the developed world, whereas it has always been so elsewhere.

    So without talking 'boring' mortgage type stuff. The issue is to see if outside agencies are succeeding in reducing your life time working efforts to zero.

    Bottom line is, if you work your butt off, have a great standard of living which is achieved either directly by wages or by the loans serviced by wages, but die relatively penniless - that's a gain for the 1%.

    It's becoming almost impossible to escape that situation, look at the way students are now being put into debt before they actually have anything, and all for a promise based on the success of those who operated a winning game on a level playing field, forty years earlier.

    Now it isn't even a game. It's a one sided turkey shoot.

     

     

  • On a global scale, I can pretty much guarantee most of the people in this forum are part of the top 1% and plenty will be in the top 0.5%

  • RicFRicF ✭✭✭

    Top 1% ranking by income requires 29,185 Euros/annum

    However, top 1% by wealth (assets) is 693,607 Euros.

    I imagine on earnings, formulites might just make the top 1%, but I doubt if many manage the wealth 1%.

    Note that many people are under the impression that if a bank lends them a million £, it makes them millionaires. That's how brain washed a credit hungry population is.

    They consider a good credit rating a kind of prize, when all it is, is a ticket to get shafted.

    Most notable is despite the sheer numbers qualifying for the top 1% in earnings, so few seem to manage to convert that advantage into wealth.

     

     

  • NayanNayan ✭✭✭
    RicF wrote (see)

    As usual I forget all about the content of previous posts.

    I've been reading a load of stuff about whether or not people consider themselves 'wage slaves', and if 'Baby Boomers' are really responsible for the current financial conditions.

    An underlying pattern emerges that indicates that the wealth accumulated and made by the middle classes was historically speaking, an aberration. Throughout history the normal situation was the vast majority of wealth was held by only 1% of the population.

    It's going that way again in the developed world, whereas it has always been so elsewhere.

    So without talking 'boring' mortgage type stuff. The issue is to see if outside agencies are succeeding in reducing your life time working efforts to zero.

    Bottom line is, if you work your butt off, have a great standard of living which is achieved either directly by wages or by the loans serviced by wages, but die relatively penniless - that's a gain for the 1%.

    It's becoming almost impossible to escape that situation, look at the way students are now being put into debt before they actually have anything, and all for a promise based on the success of those who operated a winning game on a level playing field, forty years earlier.

    Now it isn't even a game. It's a one sided turkey shoot.

     

     

    If the measure of winner vs loser is whether you have any net worth or not sure. It doesn't work in practice though - The Queen mother died in debt (by design) And George Best spent a shit ton on fast cars and fast women '..and the rest just squandered.'

    Earning a lot but choosing to spend it on a 'great lifestyle' hardly marks you out as a loser who has been shafted by 'the 1%.'

    Students aren't being forced to take on debt to get useless degrees in David Beckham studies. They are doing that of their own volition because they are idiots. If they had any sense they would bin off 'uni' and get real jobs /no debt 3 years earlier.

  • RicFRicF ✭✭✭

    If people were sat down and told,

    "Here is a pile of money. It's all you're going to get in your entire life. Between the ages of 16 and 60 you will only receive 'X' amount. But guess what? you can have it all at once right here and now, but with one proviso.

      That's all you're getting. If you spend it all, you won't get any more".

    Kinda focuses the mind when one realises that most earnings are finite.

    Not that many would take any notice of this fact, even if they did.

     

  • Rick Stivens wrote (see)

    So that endowment plan I took out as a young newly wed didn't turn out to be the smartest idea ever.  Always good to save eh ? Hmmm....

    So the mortgage period is up and we are 29k short. It's not a disaster but not brilliant..

    Ouch - how big was the original mortgage if you don't mind me asking ?  

    I think I'd go for a combination of using savings, selling some stuff I don't really need or not buying stuff I don't really need and then extend the mortgage.  I don't think I could face another 10 years though so it'd probably prompt me to cut back a bit and pay it off as fast as I could afford.   It really is a sickener isn't it and you have my full sympathy - if you can it may help to look at the low interest rates and property price increases we've enjoyed in a swings and roundabouts sort of way.

  • RicFRicF ✭✭✭

    I still have the certificate with the name of the advisor from the Halifax who tried three times to offer me best financial advice, image, in 1993.

     This involved an endowment mortgage for a sum 25% bigger than I required.

    On advice from a fellow student (whose family had 112 houses) I went for a basic repayment mortgage.

    One over payment trashed the 'sellers' trick of saying the 'endowment' was cheaper than a repayment.

    Multiple over payments smashed the mortgage out of existence in less than ten years.

    I've better things to spend money on than servicing (avoidable) debts.

     

  • MuttleyMuttley ✭✭✭

    "If they had any sense they would bin off 'uni' and get real jobs /no debt 3 years earlier."

    Which is what I advised Muttley Jnr when he realised that he was going nowhere in a third-tier "university" and on the wrong course. He binned it after one year, spent a year in the "real world" on zero hours contract work behind a bar, and then joined the Navy. He now gets a shitload of cash every time he goes off to sea, and has a trade and can train for another one if he wants. He's in his early 20s and after a couple more voyages should have enough to put down a deposit on a house.

  • When me and Mrs Worry looked at buying a house, we were told our credit scores weren't that good cos we had never had debt!? Weird, but because we had never had any loans or credit cards they couldn't say we were good at paying off debt so were advised to get credit cards and pay them off each month. Crazy.



    Anyway, eventually got a house and went for five year fixed rate thinking only way interest rates would go was up, three years later still low rates, would have been better on a tracker mortgage!
  • VDOT52VDOT52 ✭✭✭
    I'm guessing Nayan votes Tory. Telling others not to go down the educations route that you did is at best a bit disingenuous and perhaps a bit condescending.



    Tomorrow me and the wife become mortgage free home owners. I'll tell you how i did it rather than warning you off my path. Mortgage yourself up to the hilt in London. Survive for long enough for house prices to spiral again- say 10 years, then cash in and buy a house outright in somewhere that is not London. Get a job you like and thrive.
  • NessieNessie ✭✭✭

    Congratulations VDot.  It's a nice feeling, isn't it.  Worth the painful years when you have no money.

     

     

  • VDOT52VDOT52 ✭✭✭
    It does feel good but I despair for those trapped in low paid work who can never get out of the hole they are in. Sure it is better than being in Iraq or Syria but it is a horribly oppressive way to live.
  • NayanNayan ✭✭✭
    VDOT52 wrote (see)
    I'm guessing Nayan votes Tory. Telling others not to go down the educations route that you did is at best a bit disingenuous and perhaps a bit condescending.

    Tomorrow me and the wife become mortgage free home owners. I'll tell you how i did it rather than warning you off my path. Mortgage yourself up to the hilt in London. Survive for long enough for house prices to spiral again- say 10 years, then cash in and buy a house outright in somewhere that is not London. Get a job you like and thrive.

    I think of the Dianne Abbots and Shambolic Chakrabartys of the world, slagging off those who choose selective education yet thinking nothing of either having come from that set or sending their kids into it. They aren't Tories and are well to the left of any labour modernisers to boot, given their closeness to Comrade Corbyn

    For the rest, politicians of all colours will peddle the same bullshit - namely that a degree - any degree - is well worth 40 grand of debt. When I got a degree you didn't need to go into debt to get it. The reality now is that many kids who should not be anywhere near a degree are starting adult life crippled with debt for the sake of a crap degree that employees don't take seriously. 

    If they and their parents engaged their brains they'd be turning themselves into plumbers, draftsmen and so on, and saving themselves years of time and a load of money. Nothing wrong with those careers, nothing at all.

    Im not telling anyone to pass on education. Im telling them not to get mugged off.

  • Draftsmen ..... Do they still exist ? 

  • RicFRicF ✭✭✭

    That student debt thing has scared my lad straight out of a Russell group uni, where he was doing an integrated mechanical and electrical engineering degree, no less.

    It still wasn't enough to over ride the feeling he was getting shafted long term.

    I don't blame him really. It's still not good enough to merely pass. He would have to get a 'first', have fantastic contacts, and be a candidate for the 'X' factor.

    Of course, he didn't have to go in the first place, but since he was following the conventional path, going to uni was odds on even if the sales speil turned out to be a load of horse shit.

    Still, he only owes £9000, which he resents but can pay off any time.

    I'll check the data, but I read somewhere being skint but solvent puts you better off than 30% of the population.

    It strikes me that an entire generation of 'wage slaves' are being created who may well never see any benefit beyond an immediate existence.

    As for degrees. There may already be a situation where getting into debt for an apparently useless qualification actually works against those holding them, simply on account of suggesting a lack of thought and common sense.

     

     

     

     

     

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