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Mortgage-free or a month-long holiday? Which would you choose?

Sydneysiders Sally and James recently found themselves in a pretty exciting situation. They received a windfall which was enough to pay off their mortgage. The question was, should they do it – or go on that holiday they’d been dreaming about?

Sydneysiders Sally and James* recently found themselves in a pretty exciting situation. Through a significant amount of hard work and effort, they received a work bonus which was enough to pay off the mortgage they’d been slowly paying down.

A decision had to be made. Should they give in to their desire to travel – or free themselves from debt and join the 31% of Australians currently living mortgage-free?  

“With three teenagers at school, all the life expenses that we incur, and a wanderlust for travelling whenever budgets would stretch that far, it was tempting for a brief moment to do something ‘fun’ and family-oriented with the bonus,” Sally admits.

“We were certainly tempted to splurge but we knew the right thing to do was pay down the mortgage.”

Sensibility prevailed. “It’s a no-brainer – pay down the debt, then build on your retirement nest egg by saving your mortgage repayments,” says Sally. “ You don’t want to look back in 10 years wondering ‘what if?’”

As far as financial problems go, this is one we all aspire to: when a large – and unexpected – cash bonus comes our way.

Long term gain or short-term joy?

Whether it be through an inheritance, surprising win or pure hard work, imagine suddenly being faced with the most delicious of financial decisions: do we spend this windfall wisely or cast aside all sensibilities and splurge like there’s no tomorrow?

No matter how tempting it might be to book an all expenses paid, first class holiday around the world or drive out of a dealership with the car of your dreams, there’s simply no escaping the fact being sensible will deliver long term gain instead of short term joy.

Even if you can pay just a little extra each month, it can shave years off your mortgage. For example, just $100 extra a month – or roughly $3 a day – will save you more than $40,000 and cut two years off your loan term. 

Read: The three must-have mortgage features to get you out of debt fast

And while being freed from monthly mortgage repayments doesn’t sound as glamorous as spending a year visiting every continent on the planet, there are still some very real, tangible benefits to be enjoyed.

“A mortgage-free house was almost as appealing as a month travelling throughout Europe for our family,” Sally admits, adding it came with its own feeling of liberation.

“Our debt-free house has also become our retirement nest egg, and that has given us a great sense of relief that we have partially prepared ourselves and our boys for when we retire.

“We also feel fortunate we no longer have to worry about how to manage mortgage repayments if we no longer have a regular income coming in. You never know what’s coming at you around the corner.”

The couple also liked the idea of having a clean ‘savings slate’. “All our savings now don’t need to go into our debt or paying interest on our mortgage.”

Never fear – there’s still room for fun!

Without fortnightly mortgage repayments to worry about, Sally and James feel more able and willing to treat their family.

“We’d be lying if I said we didn’t treat ourselves to a nice bottle of French champagne to celebrate,” Sally says, but adds: “A fancy car or dream holiday won’t support you and your family in the future, but a debt-free property will. Do the right thing – but don’t forget to save a little for a treat to reward yourselves for doing this.”

*Not their real names.

If you came into an unexpected wad of cash, would you make the same choice as Sally and James? Leave your comments below.

This information in this article is general only and does not take into account your individual circumstances. It should not be relied upon to make any financial decisions. uno can’t make a recommendation until we complete an assessment of your requirements and objectives and your financial position. Interest rates, and other product information included in this article, are subject to change at any time at the complete discretion of each lender.

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Donna Webeck

Donna Webeck is a freelance writer with a passion for all things property and prose. She creates compelling content for residential listings, marketing materials, blog posts and feature articles in the real estate and property sectors.

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