is better to pay off mortgage if you come in to money or not pay it all off at once?

Question

a bunch of us were discussing what we would do if we won the lottery .and someone said you should never pay off your mortgage but couldn't say why

Answer 1

The usual reason for not paying off the mortgage is that it has advantages with your taxation levels and Free Pay coding if you keep it on. Obviously if you won millions and were just ordinary working class guys then you probably would never need to borrow money again and saving a little tax would be neither here nor there. In normal life, for those of us without large sums of savings or winnings, a mortgage is a great credit reference as normally a lender will ask to see your mortgage repayment cycle to see if you are a good, bad or indifferent repayer of loans. Your original question is like a lot of these questions and are based on laws that used to be in force but no longer are. For example, if you had a mortgage in the 1960's most of your repayments could be set against tax and so part of your repayments were paid for you but like all things, this little perk has been eroded over the past forty years! Let me know when you win the millions, I may need a loan at that time!!

Answer 2

Hi, you would only need to pay off your mortgage if it was a benefit to you financially. For example, your current mortgage interest rate may be 6.2% yet if you had a lot of money to invest, you might receive a rate of say 7.5% on your savings, therefore in this scenario it would be better to leave your money in the bank as it would be 'making' even more money for you by doing nothing, and you would actually 'lose out' by paying your mortgage off.

If you switch the example around and you're paying a higher interest rate on your mortgage than you could get in the bank then it would be beneficial to pay off your mortgage then as you'll be saving in the long run.

There's something else to do with tax why people say not to pay your mortgage off, but I don't really know what that is, maybe we might find out by your other answers.

Oh and I would luuurrrrrvvvvveeee to win the lottery big, so bad, I think that then the paying off of my mortgage would be the least of my worries, I would just enjoy having all that money, as with money you get freedom of choice which would be amazing!!!!

Answer 3

DEPENDS. First, interest rates are usually low on mortgages. Pay off any credit cards or loans you have first. Second, mortgage interest is deductible so you are saving money there, too.
The lower your mortgage gets, the more EQUITY you have when you sell, so there is an advantage, but make sure you are paying off higher rate loans first.

IF YOU WIN THE LOTTERY, yeah, pay everything off and upgrade to the best house you can afford. Then live off the reverse equity the rest of your life! Whoo hoo!

Answer 4

Eventually you do want to pay off your mortgage. Interest is the main culprit. Many credit agencies, mortgage houses and banks would love for you to hold onto a mortgage for as long as feasibly possible. Take a $200000 house at 7.5%, what's the difference between a 15 and 30-year loan? About $170000. Now assume you are able to add a bit to help pay off the mortgage early. Maybe take that 15 year and pay it off in 10. You would save yourself roughly $50,000 in interest. I don't know about you, but I can think of a lot better things to do with $50,000 then give it to the bank.

Answer 5

My husband died recently and the life cover he had covered his mortgage, etc.When I received the monies I paid my mortgage off straight away. Most people take their mortgages out over 25yrs. Theres no one in this world that can predict what is going to happen in the future ie; loss of income etc. As a lone parent there is no possible way i could have afforded the repayments on our mortgage alone. I no longer worry about whether i can meet the payments on a monthly basis, and glad i decided to follow this path with the way interest rates etc are climbing in the UK and many people at present having their homes repossessed. But i would swap the security of my home now my own and not the banks....to have my husband back!!!

-x-

Answer 6

There are situations where paying off a mortgage makes perfect sense. Can you invest the money and make a higher return than your interest rate? If so, it can make sense to keep the mortgage and invest the money. If you can't make a higher return, then you're further ahead to pay off the mortgage.

Answer 7

There is the tax relief but that depends on the mortgage and is being phased out. I would imagine however, if you and your friends won the lottery, they would be moving a little up in the world and would buy rather than mortgage.

xxR

Answer 8

My dad got an inheritance backa couple of years ago and was going to pay off a large chunk of his mortgage, he was only allowed to pay back so much each year or the bank levy charges if you over pay too much. However if you won the lottery, would it really be an issue?

Answer 9

You should! Then you dont have to worry about anything moneywise later.

If you dont, you are just adding onto the interest, so if you are your mate had a house each, you both owed £4000

You both win money on the lottery, you pay the £4000 off and your friend doesnt,

Your friend will probably end up owing £8000 depending on how long they take to pay it.


:)

Answer 10

In some cases topping up your mortgage can be a cheaper way to borrow money. Depending on your circumstances you may wish to retain a small mortgage balance to borrow against.