Should You Save, Invest or Pay Off Your Mortgage? 

Absolutely Right. My fixed rate expired in May 23, went up & the best fix i could get was 4.6% up from 1.94. The instalments went up by about £150pm, but looking into it a bit deeper i noticed that the interest charged was £940, up from £380 !! I have decided to overpay by 800pm and the best thing is, my mortgage will be cleared 7 years earlier, so 4 years and im done !! Imo its a no brainer.. forget the new cars etc & concentrate on clearing the mortgage, after its clear its holidays, cars or whatever you want. Sadly the west is brainwashed into thinking keeping up with jones', living a false highlife with sleepless, depression is a must, debt fuelled life is wrong, mindset has to change !!

We paid off our Mortgage and upgraded our homes Energy Performance to A+ (EPC 107 Score). Bought two electric cars for cash, now we visit family & friends all the time really cheaply, supporting them through this Cost of Living problem.

My vanguard boiler has never broken.

We dont have ISAs over in Ireland, so we dont have the same tax breaks you guys have over in the UK. I think its important to diversify. If had extra cash, I would split it between my pension, mortgage and investment account. Extra in pension for tax breaks, extra in the mortgage for peace of mind and extra in regular investments because they can easily be liquidated.

Just locked a rate for January at 5.5%. That's up from 2.2%. What Im gonna be doing is paying my mortgage payments. If I have spare money I'll invest in stocks/ETFs

I'm paying off my mortgage due to interest rate hikes. I'm too risk averse to put a large lump sum into investments in one go and get more out of knowing I've guaranteed my myself a 6% saving on a large balance. Great vid as always!

Like it and thank you for the update - paid off my morgage 3 years ago and ploughing a lot into my pension, although returns are not great - hoping that might change in the next 3/4 years . Other cash is in allowance ISA with fixed for two years but will look at swapping between cash and stocks ISA as they go - Bonds come out in Jan ( 4%) and will see what is on offer then - yes I'm going to have to pay tax on it. I think people who are reaching near retirement need to think acctually how much do we need to live on based on current life style, again thank you for the update as people need this simple money talk

Great video. Congrats on hitting 50k subscribers 🎉

9.55 - although, dont forget, as an investment property (for property investors), the figure for return is higher than 2.4% (at least double in most cases), as your taking rent as well as seeing the capital appreciation

I do all 3…. $250 a week towards mortgage principle, $100 week into investments and about $100 week into our emergency fund (which is already over 6 months of expenses, but has a 4.75% rate). None of this includes the weekly 401k/HSA and employer matches my wife and I do. As of right now our Mortgage will be paid off in 6 years with a 11 year total payoff. And we should have good returns on the investments. All this when my wife and I make just the average salaries for our state, but we also have zero debt because we only buy used cars with cash and are smart with our money…

Measuring inflation vs savings doesnt work though. Inflation isn't say "8%" or whatever for everyone. If you are a millionaire do you care if a pack up butter has gone from £2 to £4? Does that wipe out your savings? no. But it does for someone on the breadline. inflation effects everyone differently.

You are a top man, Toby. I am currently in the dilemma of paying off a bit of mortgage before remortage in 2024. Onky problem is my repayments are going up by ~£1k per month on current interest rates. My only hope is they will come down, even slightly, to help me. Otherwsie I'll have to decide between dipping into savings or sell a house we love all love. Trouble is, paying off single digit or even +20k doesnt do much to monthly payments.

Interesting video. What we do is this: first we save up to a sufficient buffer. Once that's done, everything that is left is split to 1/3 extra mortgage repayment and 2/3 towards the stock market. Everything that goes to the stock market is going into ETFs, split over MSCI SRI ACC ETF, Water ETF, and Dividend ETFs, and will be split into more ETFs as we send more money into the stock market. We only pay 1,4% on the mortgage for 20 years fixed, but we want our monthly costs to come down hard, while also increasing income at the same time. Doing this simultaneously spreads risk. We have a lineair mortgage so monthly costs come down anyway. While the monthly costs come down, we have more money to send to the stock market. I call this method: "The 3 Snowballs". These are: 1. Linear mortgage, 2. Increasing the monthly mortgage payment amount with additional mortgage payments and, 3. Investing in the stock market.

I don’t care about being mortgage free or not, it’s purely maths for me. I’m putting all my lump sum in fixed savers, but overpaying £1000 monthly on residential mortgage because I can’t find a safe way to generate more than 3% on a monthly £1000 atm, so may as well overpay to save interest. If the interest rate becomes favorable in the future and I find a good investment, I’ll happily remortgage to take money out of my home to invest. I’ll probably also take advantage of a dipping house market to move my rentals into a ltd so I can claim stamp duty back on my home. Anyway, my point is, will happily take equity out of my home and live in a mortgages home, but it has to be a sure thing good investment, not just the prospect of some good investment.

Your return caluciton on compount interest cxluator was wrong, it should have been £398,396,825.63. You had the compound interval set to monthly rather than annually (the bottom box)

Been saving 1k/month on average last 10 years. Car and student loan easily paid off. Now just 20K left on my mortgage after a 40K downpayment last year, 45K in savings, and 3K for fun etf trading, and enjoy nice holidays and things. Feels amazing. If/when stock markets crash I will invest most of it in stocks long term for early retirement(15 years).

good video. Two things. Taxes. If you pay the higher rate, you need double the return on your investment to break even. Also, you always incur in risk. House prices are now collapsing. Being left in negative equity or getting a margin call isn't fun. Pay off your mortgage.

personally I say pay your mortgage off... there is nothing quite like having peace of mind. Knowing you don't have that monthly payment anymore is exhilarating

Use a simple mortgage calculator. See how much your prepayment will ACTUALLY save in total interest. That is the real money that you prevented leaving your kitty. Money saved is money earned! Paying off high interest mortgage is a no brainer!

but did you mention the compound effect on money invested in stocks? Stock investment compounds, while mortgage doesn't.

Thanks for another great video. Now I have more spare cash, I am paying off my mortgage quicker, even though I have only 7 years left and 4 of those years are at 2.2%. I know it seems crazy, but I did look at the "high" interest savings options and came to a similar conclusion, that the offers were poor and inflation made it almost a waste of space. I have run my own business for 17 years, so I'm not risk averse, I just think that it really depends on your stage/age of life. Maybe you don't want to leave your family with a mortgage, even if you have savings etc. The biggest thing can be to leave your love ones with peace of mind. It also gives you a chance to maybe retire earlier, as you said, or maybe even change to do that job that you always dreamt about, but it never paid the money. In my case, I am not using all my free cash to pay off the mortgage, just enough to clear it off in 3-4 years. Years ago, I came across places like the funding circle and my company borrowed money from them at a crazy rate. The interesting thing was that investors could bid to buy some of the debt, say 20% and offer this at 17% interest. All the bidders would be reviewed and those with the best offer would be presented to the loanee (as a consolidated interest rate a fee). Sadly the company no longer offers investors access to this scheme, but it seems that it would be an interesting way to increase your spare money, especially as you could really stick your nose into the loanee's (I know it is the wrong term) Business. My final thought is to use the money to start a small business, maybe 3D printing, maybe Etsi or ebay, maybe invest in your kids and share you rewards whilst helping them (although the risk of the latter is very high to cause ungratefulness lol).

Ive been pondering over this the last few months, My term is due end of 2025, so for the next 2 years i stuck a big chunk into savings (Filled up my ISA, and took advange of the fairly decent fixed savings account) The way i see it is im now over paying my morgage, and in 2 years ill have enough to nearly pay it off. Id rather have the peace of mind and be in a good position when the time comes i can rent it out and move aborad without worrying too much

For me its a no brainer. Pay down your mortgage as its guaranteed to save on interest as well as reduce the term. Investing is no guarantee yo will make more money. If you can do both like me then do both. I just renewed my 5year fixed and went from 1.74% to 5.09%.....ouch. I changed lender to get best rate and paid $50,000 to my previous lender at payout and front loaded my new mortgage with a lump sum payment of $20,000. I changed term from 20 years to 10 years and set up automatic lump sum payments every 2 weeks of $450 as extra payments. I am allowed to pay up to 20% extra each year of the original amount borrowed without penalties. I am well within that. I will pay off my mortgage in just under 4.5 years and save $32k in interest

Why the fact of taxes is left without much attention? Investing 200 pounds/month for 15y 5m at 6.6% will result in the value of your stocks to be 63.4k. But you'll have to pay capital gains tax if you decide to sell those stocks (20% for higher rate taxpayers). And quite likely you'll get outside of capital gains tax allowance which is already just 3k. Same applies for savings interest. Right after your allowance of 500 pounds, you'll be taxed at 40% (if you're higher rate taxpayer)

Thanks Toby for the clear information. I have 45 payments left at 1.63% then go onto a new rate so am hoping the rates will average out by then. I do, strangely, have spare cash to put into the mortgage so doing both investing and overpaying. Time will tell if the gamble pays off. Thanks again.

Paying my mortgage down still owe just under £100k on our house what worries me is I’m about to turn 31 and have no other investments ect or retirement funds only a house valued at £480k, and it’s tiny! After I pay my mortgage off in the next 2/3 years hopefully sooner I am going to reinvest in my electrical company and hopefully that will pay off long term but life is expensive and none of us are as rich as we think

Great video ive managed to save up a chunk of money which im thinking of oaying my mortgage off with but was wondering whether it was a good idea or not 🤔 these rate hikes are a real pain

Do a little of everything. Most people do none of these options so we are alread way ahead of the pack even if our returns arent 'optimal'

pensions - 40% return if in high tax bracket not discussed here !

'Gentle touch of a like button', finally someone that doesn't us viewers to smash it lol

What would you do with £10k? Put in smp500 or overpay a bit of a big mortgage which is on a reduced variable rate

I understand there’s no point paying off the mortgage when you have a deal at 2% but surely it must be worth while overpaying while you have the free cash to do so before you get stuck at higher rate? Then you have a better LTV? Or would you be better off investing it then selling the investment to pay a chunk off the mortgage to get a lower monthly payment? Great videos, keep up the great work 👍

Hey Toby Great video 😊 I feel all 3 are valid options in the current climate. Would you consider making a video about how "boring" low chance of growth but high dividend yield stocks can become more attractive when we feel indexes such as the S&P500 are overvalued? That was a mouthful of a sentence 😂 let me know what you think, but I appreciate it might go against your channel philosophy of not worrying about ups and downs, and just investing for the long term.

Another great vid, thanks Toby. Putting all into VWRL atm

Why do non of these videos mention inflation when talking about the investment option?

Buy the book “the title is unimportant” it shows you how to cancel debt without paying a penny.

eyup, i know Bristol when i see it! 7:06! great video Toby

An interesting video. My 2 cents on what I've done. I'm from New Zealand, with a somewhat similar mortgage setup to what is in England I would think. I had the opportunity to buy the house I'd been renting for 12 years, 7 years ago. 49 years of age back then (single, no kids), with a 30 year mortgage. I've also had experience for 20 years + in small share investing. I decided I'd pay off my mortage as fast as possible - giving myself 15 years. However, with very low rates at the time, and careful control of my spending I was able to pay most of it off, with now just 4 months remaining. At the same time I kept up small regular monthly payments into a share fund group of 4 guys I was associated with. Friends did say I could have used that money to invest more heavily instead of paying down the mortage. Totally correct, but I don't own a crystal ball, so thought my safest bet would be to pay off the mortage and worry about the rest later. Now that current rates (1 year) have jumped from around 2.5 - 3.5% to over 7% now, my interest payments work out to a fraction of what they might have been if I'd just paid the required amount each year. Of course I could have been far more well off if my shares took off, but then they might not. Still, nothing like the feeling of being close to mortage free so soon. I'm also glad in the knowledge I saved about 50% of the initial value of the house in interest. Of course, my situation is an outlier to most people's situation, but live in your means, don't squander your reserves and you could do fine as well. Keep up the great videos - Neal

Do all three

Nice work on your video 😊keep up with your great videos 👍 all paid up 😊💃🕺

Hi Toby great video mate, what’s the stock display on your wall behind you? Where did you get it from?

If savings rates go above 4% I’ll pay debt off. And savings interest I’ll use to overpay mortgage. Not buying new cars for a while. Pay off your most pensive debt first. You can’t take your money with you either we’re all headed to the same place!

If you can afford to pay your mortgage off then 💯 do it, then use the money you save to invest 🤷‍♂️ that way your money is earring you money instead of letting the bank double dip that means earning stupid amounts from you in interest plus the money they earn from lending your money out 🤷‍♂️

Great video Toby! What I don't think gets mentioned enough for homeowners looking to remortgage in the near future is LTV and how this can affect decisions made. Paying off mortgage at a low interest rate can actually be worth more if it reduces the rates you'll be offered in the future

Thanks Tony. Just keep on stacking sats 😉

Pension contributions are arguably the best thing to first put your money

My home mortgage is paid off. I own a BTL with 30K left. Will pay off when low fixed mortgage ends in 2027.

I think it's important to have investment as part of your core outgoing. Not only do you get those compounding effects, but you also get to hone your temperament and not sell on a whim.

Great insight. I'll invest it.

fixed rate due at end of yr. Lucky can actually pay off mortgage 10 yrs early. Pay it all off?

If you have no mortgage, you could always get a deposit for another property and HMO your old house, that looks pretty sweet on paper rentals to students at university.

we have about 50k in investments. tbh the 150k we have in a locked account is better for my mental health. the investments have given us about 5k in the last 12 months. we dont need so much money since we cleared our mortgage. just utility bills of about 500 quid a month and we have 11k month income before tax. cash is flowing nicely for us. looking to buy a new build villa in the costa del sol in spain in 2030 when we retire. we live in sweden btw not blighty. but the interest rates are the same here. many swedes have giant interest only mortgages lol. this year i haven't seen many new cars where we live. when u lease a car or buy one on hire purchase here your monthly payments increase when interest rises. it's not fixed. these idiots here are in for a nasty shock over the next few years

Im 28, £140,000 mortgage on a £175,000 house, remortaged last year at 2.4% (phew!) Were currently paying £620pm plus 10% annual overpayment (£1400pm) into a savings/'overpayment' account (which has 5% interest). We earn between £6000 - £6500pm (self employed). I simply want to pay off the mortgage as quickly as possible, and have more freedom to travel, adventure, give my daughter (and future kids) as many opportunities as possible and have peace of mind when older/early retirement. We might upsize when the market is in better shape (which would allow us to expand our business/income), so I dont think that would change the situation too much, just bigger numbers all round. Anyone got any thoughts/ advice on this situation?

I’ve been really thinking about this, as we’re on a really low rate (2.1%) for the next 3 years. So you would think paying off the mortgage is stupid as I can get 4.8% in a savings account. However do the calculations for paying off vs investing take into consideration that on a 25 year mortgage you might need to remortgage 5 times? So the rate could change drastically, and for only a £6k bonus if you invested over the 25 years, there’s a lot of risk if the interest rate ever flies up right when you need to remortgage. What do you think?

why is everyone assuming stocks keeping a 10% return?

Pay of your mortgage. It’s a guaranteed benefit. You will have a home to live in and don’t need to worry if you get laid off from your job or want to change careers. You will own a significant asset and most importantly, all the money that the bank used to take from you each month is now yours to keep.

Save a little, spend a lot

It's nice to show how much would the £1,000 invested 200 years ago made within this time. But it would be also worth noting, what value this £1,000 had back then. I'm guessing that ordinary people wouldn't be able to invest such sum, especially knowing that not so long ago (within last 100 years) you could buy house in London with this amount of money. So, while it sounds nice, it's not that straightforward :P

Just debt recycle the mortgage. Investment returns are so much better when younger.

Clear your debts first

What if you dont have a mortgage?

Ver good video

Mortgage is the biggest scam in US history...

If your savings rate is higher than your mortgage rate, save. If your mortgage rate is higher than savings rate, pay down your mortgage. Simple.

If I was single id sell the house and live in a van

Taxes are so high in the UK, saving money is pointless as the taxman takes 40% of any interest you earn if you a decent salary….

666? No thanx

I just buy a lot of crypto. Fly or die.

He knows a lot about the words, terms & history of some things. Yet he knows nothing & doesn’t offer any advice

Buy bitcoin, even if just a small allocation.

Hello, wondering if you could explain something I really struggle to get my head around 😂 I know some people are recommending putting mortgage overpayments into a higher interest savings account and then using that money to pay off a lump sum at the end of a fixed term (instead of regular monthly overpayments). But, surely the daily interest being charged on your mortgage balance (for example £200K at 1.9%) is going to work out higher than the daily interest you would earn on say, £5K savings at 5%? Is it not better to reduce your mortgage balance on a monthly basis to save daily interest? Am I missing something? Sorry if it's a dumb question 😬

Great video yet again. Mortgages come with so many emotional attachments. My house is somewhere i live but its also an investment. Its bricke and mortars. And i have no personal attachment to it. My parents and other family on the other hand saw their house as a home.

On a superficial or purely financial level, interest saved is is as good as interest earned. So if your mortgage is 2% and you don’t mind risk then invest to hopefully get the 6.66%. If your mortgage is 6% and you are more risk averse then pay off the mortgage. Psychology can be a big factor many people - not many can hold their nerve when the market is down and they are nursing a loss of £250k and many value very greatly the house being paid off - I imagine the de-stressing from that would be significant and would even lead to better health. Another thing to factor is not having all your eggs in one basket = house paid off no-one can take it from you - I don’t think I’d like to have a £1million mortgage and £1million invested; better to have 500k invested and a 500k mortgage.

Not sure I'd want to advise people stocks are liquid - you really don't want to be selling in the red

Didn't even have to watch the video. The answer is PAY OFF YOUR MORTGAGE. Just the amount of money you save in the compounded interest on that mortgage beats the (not necessarily guaranteed) percentage of return you'd get on an investment account.

Another Jedi level knowledge bomb video Toby!

One thing that rarely gets mentioned is that if you are mortgage free, you are less likely to need to get finance for unforseen expenses such as dental, cars, new appliances etc. These loans are often at a very high rate.

thanks for the calm logical analysis. Love the vibe

Hi Toby, I have seen your videos, they are really good. I am new to the UK and have a Stock & Shares ISA. I have a dumb 😅 question, can use my ISA account for regular trading, so that I do not have to.worry about any tax implications?

Based on my calculations with the current scenario if someone has bought property e.g. £250000@5.5% then overpaying for the initial 3-4 years will make much more sense as interest amounts are lot higher during the initial years. When the Principal to interest ratio will be nearly 2:3 then stop overpaying and start investing in the low cost index fund. I still feel Savings account is the best way to fool people by the banks.

Paying off house is tax free (saving), investing gains eventually is not.

aight now do the video with 7% mortgage rate, not 5%.

Wouldnt it be best to put any over payment in to your pension? Lets say you want to over pay £300 per month, thsts £500 before tax (assuming you pay 40% tax). Then at 55, take 25% of your pension as lump sum and clear your mortgage.. You also get the compounding gains of extra in the pension pot. If at anytime interest rates go so high that you need the £300 then you stop paying into the pension and pay the mortgage ? What do you think?

Can you make a video on the allegations on Gary Gensler and his retirement and what impact this might have, an overview of dark pool trading would be great too I feel like your audience would benifit. 👍

Great video. I've got a stocks and shares isa. I've had it for 3 years. And the money would have been better under my bed. My private pension on the other hand, as done well. But I've had it for over 30 years!!

Didn’t need to watch this, never mind saving or investing, pay off the mortgage as once it’s paid you’ll have more money to save and or invest, it’s not rocket science, these so called financial gurus, financial experts, lol, just complicate things

Nobody lives 200 years, debt first, and invest your cash in creating an incredible revenue stream if you have the imagination.

Do all 3

Chose mortgage pay off when the Covid shit show started. Printing money to infinity I guessed would cause inflation and the resulting interest rate hikes. Been finished for over a year now and ten years early. Still continued my work pension match throughout. Honestly best decision I ever made - investing/saving more than 60% of income now.

Investing at the moment is nonsense whilst rates are so high. May as well get great monthly interest at a high rate whilst it lasts. The market has been stagnant for about a year. And I’ve only made about £150 in 2 years of investment. Could’ve made a lot more if I’d have thrown it all in a savings account.

5:38 but you need to consider the amount of money that has been printed. As you said before, in the same period of time interest rates were almost 0%. So, free money and printed all assets went out of the roof. There is no warranty that the next 20/30 will be the same.

I don't really get the 'feel good factor'. If you have the money to pay off a mortgage in an investment account and have time on your hands to ride out the bumps then that is a far preferential alternative imo, just gives you a lot more options.

I ve decided to pay mine off which is out of contract in October

Do you have videos about having debts in this environment?

Love this guy! Intelligent information in layman's terms thanks brother!

excellent video!!!

If you're currently still on a low fixed rate mortgage but can afford to pay the extra it makes much more sense to put that extra into a savings account with a higher interest rate and use it when you come to remortgage to improve your loan:value ratio. It also means the cash is still there if you need it. Your mortgage provider wont give you back any of the cash you used to overpay your mortgage.

pay it off ASAP. We paid ours off 6 years ago. now we we live like royalty. saving about 4k month towards our retirement. we have zero loans and a cheap car. 200k saved. clear ya mortgage as quick as you can. the banks no longer have a hold on you then

Great video Toby, thanks 👍

If im at 1.5% interest rate for the next 4 years, but expect to pay say 4% after that, does it make sense to overpay now, to reduce those future interest rates, or am I effectively making a 1.5% return on the overpayments?