QLagoon - Health, wealth and happiness

Conventional wisdom is that an individual’s mortgage debt is a burden and should be repaid as soon as possible. Yet in the business arena funding investment through debt is considered the norm and having too much capital tied up in fixed assets is seen as a negative.

Your mortgage payments have been an “enforced” property investment

Everyone’s balance between income and assets is obviously different and is the key to whether paying off a mortgage makes sense. As you first got onto the property ladder your home mortgages was a form of “enforced investment”, where you gave up usable income to fund a home to live in but also to build up a long term investment asset. Typically the more income you gave up in your earlier working life the larger the net value of your property asset(s) today. Any surplus income you had now forms your cash or liquid investment savings.

Do you want to swap your available cash for even more property assets?

If you decide to accelerate the repayment of your mortgage debt you are effectively decide to swap some of your readily available cash and other investment assets for property assets, which are much less “liquid”. Remember also that banks and mortgage lenders are more reluctant to lend to you, even when secured against property assets, when your income falls or when you really need the cash (e.g. if you are made redundant).

Remember banks often won’t lend you money when you really need it

A cynic would say that banks are most keen to lend to you when you don’t actually need the cash. So once you’ve paid of your mortgage it could well be more difficult to get that cash back should you need it again should your circumstances change

You will see from the QLagoon Personal Finance section that your ideal cash consumption needs are likely to grow immediately after retirement, whilst you are active enough to enjoy it, before falling away dramatically into older age. So unless “slippers by the fire” is you ideal of retirement heaven you will need extra cash to fund your lifestyle into the first stages of your retirement.

Keeping a mortgage makes sense if your spare cash resources are uncertain

So paying off your mortgage makes sense only if you’re confident that you will have enough cash investments and other sources of income to fund your own retirement plans and support your ideal lifestyle.

If not then retaining and using some form of mortgage loan as part of your financial planning mix makes a lot of sense as this converts static property assets into usuable cash resources. As long as you have a strategy for servicing and repaying the loan then retaining a mortgage can provide relative cheap and useful “bridging” finance to support your lifestyle – secure in the knowledge that you ultimately have high value property assets behind it.

The QLagoon Mortgage section outlines how different types of mortgages can help you meet some specific lifestyle planning objectives.