When to pay off mortgage? Is it always a bad idea?

I’ve always been a “never lump sum pay-off your mortgage” person (like I imagine most people who read financial literature are).

But with interest rates increasing, I’m becoming more of the mindset that paying off the mortgage before re-upping might be the best play.

I’m writing here as a way to ‘steel-man’ both sides of the argument and try and gain clarity from opposing views that will help in making a decision.

Rough situation:

— We are married with good collective income, although my income as a business owner is not set in stone from year to year and there are inherent risks going forward.

Wife’s job is very secure public sector with great pension.

— Have around £180k left on mortgage. This is middle England, so we live comfortably without London prices or anything like that.

We’ve also done a lot of work on the house, so added a tonne of value in the last 1.5 years we’ve been here.

We’ve also been over-paying on the mortgage. 4 bed detached in the Midlands, valued at around £520k. I mention these items as data points to explain the situation a little more.

My philosophy on this is that ordinarily I’d be a ‘mortgage is a good loan, don’t pay if off’ type of person.

However, that was with the 2% mortgage rates of old! I personally don’t think those are coming back.

My thinking around this is to the extent that the mortgage rates creep higher towards what I consider a “reasonable” rate of return (around 8%), I am more inclined to pay off the mortage in one lump sum.

My thoughts on why:

– Obviously, mortgage rates of 6%+ are much closer to what I would consider my “reasonable and safe” (excluding crypto!) yearly rate of return on investments.

That 8% is my very conservative figure drawn from my own records of investing over the last 12 years.

– The psychological feeling of paying off the mortgage in full. I know, this one is a hard-sell for some people, but for us coming from an ordinary background, it would be palpable.

– With our good incomes, we’d soon top up money that would have come out of investments to pay down the £180k.

And due to investments over the years, I can fairly comfortably pay off the mortgage without dipping into pensions, etc.

I’ve thought about this a lot and I’m familiar with the arguments against paying off a mortgage in full. And, like I said, I used to be that person.

However, I feel like those days of cheap money and low mortgage rates are gone.

And as mortgage rates rise, it becomes more of a smart move to pay it off in full if you have the means.

I realise I’m making an argument on one side here, but that’s my philosophy right now.

I have done well investing over the years and have learnt as I go. I’m also a self-made company owner who’s built an income from the ground-up.

Most of what I’ve written above goes against my beliefs as a business owner and someone who’s quite confident in his own investing ability over a long enough time horizon.

So am I just making a purely emotional argument here (‘pay off mortage, get good feeling!’) or is there a cogent argument here for paying off mortgage if rates hit, say, 7%?

I should note here that we’re due to re-up mortgage mid-way through next year.

And I understand that waiting to see how things play out interest rate wise over the next few months is paramount here.

So I pose this as a question: given my rough situation outlined here, at what point would you pay off your mortgage in full?