Mortgage-free: More freedom for living your best life?

Being in the position to pay off your mortgage can feel like a gift to self – after all, you’re effectively gaining hundreds of pounds a month that would otherwise have been earmarked for your mortgage lender.

While temptations for spending may abound, be mindful that this increased disposable income is also a golden opportunity to reset and review your retirement plans.


  • Paying off your mortgage means you’ll free up hundreds of pounds a month as a result of no longer having mortgage payments to factor in.
  • It can be all too easy to ‘lose’ this money to your household budget or daily spends. How powerful could it be if you were to invest it, though?
  • A financial adviser can review your current budget and retirement plans, and help you make the best choice for you while making this extra money work as hard as possible.

Life’s major milestones are sure to stick in your mind – meeting your future partner, having your first child, becoming a home-owner…to name but a few.

But how about when it comes to being able to pay off your mortgage – would that be a memorable moment for you too?

No two ways about it – completing the repayments is not to be underestimated in terms of personal achievements, as you may have spent decades setting aside income and calculating interest rates and mortgage deals. While this milestone may make you feel less fuzzy than your first date, it’s nevertheless life-changing.

As well as owning your biggest asset outright, you’ll also discover that your bank balance is looking much more flush each month – hundreds of pounds that were previously owed to your mortgage lender. You may well be tempted to splash some cash on a far-flung holiday, or treat yourself to a new car or finally embrace some home renovations. However, your best bet might be to first discuss your options with your financial adviser in order to review your budget, savings and retirement strategy to see if you’re using the extra money in the smartest way possible.

Press reset

Tony Clark, Senior Propositions Manager at St James’s Place Wealth Management, has some food for thought:

“There’s every reason to celebrate when you pay off a mortgage, so why not see it as a great opportunity to review your finances?” There’s a good chance when you pay off a mortgage that you’re approaching peak earnings, family expenses may ease if children have grown up, and sometimes income is augmented by an inheritance or savings maturing. It’s a perfect time to refocus.”

Be mindful, however, that paying off your mortgage doesn’t necessarily mean you’ll save more. According to the Institute for Fiscal Studies, when owner-occupiers in their 50s and 60s paid off their mortgage, there was minimal change in their pension savings – even though they benefited from more than £200 per person on average.1

Clark points out the importance of taking the time to consider how to put those extra hundreds of pounds per month to best use, now they’re no longer used for mortgage payments.

“The amount per month may seem relatively modest, so it’s easy to allow it to merge into a household budget or day-to-day spending. Yet think how powerful that same amount could be if you invested or saved it over a longer period – and you wouldn’t miss it, as you’ve had to pay the mortgage monthly for the past 25 years anyway.”

Eyes forward

As is always the case when it comes to financial planning, it’s never too early to start forward-planning for how to both pay off your mortgage and save for your retirement.

For instance, if you were to pay off your mortgage aged 57 and work until the age of 66, you would have nine years of monthly savings to put towards your retirement.

And if, like many of us, you’re planning on enjoying a long, leisurely retirement, these additional funds may be crucial. If you’re currently a 50-year-old man of average health, the Office for National Statistics life expectancy calculator indicates that you’ll live until you’re 84 – while a 50-year-old woman with the same reasonable heath is predicted to live until the age of 87.

What does this mean in practical terms? Essentially that many years post-retirement will need to be funded – whether you’re just enjoying a slower pace of life, starting up a business, or fulfilling dreams around travel, family or other personal desires.

Now contemplate how the money freed up having paid off your mortgage can make a difference. If you were to save £500 each month after a mortgage term has expired, this would amount to £60,000 over a decade – possibly even more, depending on how you choose to invest it and allow for tax relief on your contributions.

Make your decision count

You may decide to wait until your mortgage is nearing its full term before weighing up your options; however, it would be wise to already have a financial adviser on your radar. If you’re unsure where to start, they’re best placed to help you understand the different options, and ensure your money is working as hard as possible.

An expert will also be able to review your short- and long-term savings and spending needs, and the current state of your pensions, ISAs, investments and other assets. Not only that, but they can also look at the most tax-efficient way of using your extra money to meet your retirement goals – for example, increasing your pension contributions or making better use of ISA allowances.

On the other hand, professional guidance can help you consider other priorities, too.

“People’s views of later life are changing, accelerated by the experience of COVID-19, where we’ve had more time to think of families, friends, our health and well-being,” suggests Melloney Underhill, Marketing Insights Manager at St. James’s Place Wealth Management.

“Remember that monies freed up after a mortgage is paid off need not go solely into hard investment just to maximise personal gain. Many will now want to use it for their children, for older dependents, or to simply enjoy themselves through travel and comfort as they get older. But a balance between these desires, coupled with informed and dispassionate advice will give you the widest choice.”

A financial adviser is not only able to help you reassess your spending, but they will also advise on wider issues. After all, what better feeling to ponder on as you’re living your best mortgage-free life, than knowing you’re also optimising your inheritance planning for your family members in the process?


1 How does pension saving change when individuals complete repayment of their mortgage?, Institute for Fiscal Studies, Dec 2020

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

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