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Invest cash or pay off mortgage
Gavlaar
Posts: 44 Forumite
Am after advice please, have about £80k in a savings account which will drop from 3.2% to about nil in the next month, have a mortgage of about £65k (still in early 40's) - would it be advisable to pay off all of my mortgage with my savings or fish around for the best savings deal (about 2%) and leave my cash in there? Or do a bit of both?
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Comments
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Will need to know a bit more, for example what mortage rate do you have? Do you plan on needing money in the near future? Do you have a pension?0
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My mortgage rate is a Bank of England baserate tracker which is at about 2.25% at the moment. I am paying into a company pension scheme, am paying in the most I can which the company matches without paying AVC's, I have to say I am a bit sceptical about pensions and how much they will be worth when you retire.
Good point about the rainy day fund, though there is nothing on the horizon to suggest that I will need emergency funds shortly but you never know with the current economic climate.0 -
Am after advice please, have about £80k in a savings account which will drop from 3.2% to about nil in the next month, have a mortgage of about £65k (still in early 40's) - would it be advisable to pay off all of my mortgage with my savings or fish around for the best savings deal (about 2%) and leave my cash in there? Or do a bit of both?
I would say, hold on to the mortgage at the mo, at such a good rate.
If you want better than a saver rate and liquid funds get a Santander 123 current a/c pays 3% up to £20k. You can have more than one account and get cashback via Quidco.
You could also consider an ISA and maybe go for the full allowance in a S$S ISA with some funds, plenty of Info on here.
Depends on your timescales, plans, tax rate etc.
Good Luck
Alan0 -
Assuming no need for the money imminently I'd be tempted to pay off the mortgage, and have done so myself.
This would till leave you with a reasonable rainy day pot. Other alternatives are to maximise your cash isa allowance for now and in future years, to have the capacity to use this in future when interest rates may rise.
Many would say that you could get 4-5% or more on investements and this would be statistically justifiable approach which would probably be beneficial compared to your current mortgage rate. This would mean a moderate level of risk, and in the unlikely event of a rapid increase in base rates it would take some time to marvel your investments to pay down a mortgage, and potentially at a time when share prices may not be favourable.
This assumes no expensive debt, and with the money freed up this could be put into a combination of savings and investments, sheltered in isas where possible, that would form an alternative fund from your pension, allowing flexibility.0 -
Pay off the mortgage, it`s a DEBT!
Great satisfaction knowing the roof over your head is paid for and can`t be taken off you.0 -
We were in your possition 9 years ago (40 years old with savings which exceeded mortgage). We opted to pay off the mortgage and have never looked back - fantastic feeling and then just get on with saving like mad for early retirement!
The biggest problem was psychological, we felt like we had a lot of savings at the time, whereas in reality the net amount was not significant and when we paid off the mortgage, it felt like we'd been violated, but once you get over that and start building it back up (using the previous mortgage payments) you will find it all just comes together.
R0 -
We paid off the mortgage from savings 10 years ago. It may seem illogical when your mortgage rate is low, but owning the roof over your head is a pretty good rainy day fund in itself.
That said there's probably more of a case now for keeping the debt than there has been for some time. It's declining in real terms if inflation is higher than the interest rate, and if (when) inflation takes off, the mortgage will pay itself off!"Things are never so bad they can't be made worse" - Humphrey Bogart0 -
I agree with what most before me have suggested “Pay off your mortgage”.
The feeling of security is priceless, no worries what life will throw at you, you always know you have a roof over your head.
I then saved and invested what I would have been my mortgage cost and when I bought bigger houses I never had to take out a mortgage again.
I realise this is not the way most people feel about mortgages and house prices/buying. However personally I have never looked back.0 -
I don't agree with pay off the mtg, if this is your only savings emergency buffer at all.
I'd keep 3 months spending at least. The point about emergencies is, that you don't know they are coming until they come. If this isn't your only cash, or you keep 3 months in reserve, then go ahead and put the rest in your mtg if you like.
But an AVC, with tax relief, esp if your AVCs allow the TFLS to be taken from them instead of commuting index linked pension would be a better idea.
As could be, S&S isas if you haven't been using them0 -
Reading the original post - Mortgage is 65k savings is 80k, so if the mortgage is paid off that leaves 15k to invest/save as buffer.0
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