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  • FIRST POST
    • I am sparticus
    • By I am sparticus 14th Jul 17, 11:11 AM
    • 4Posts
    • 0Thanks
    I am sparticus
    To fix or not to fix....
    • #1
    • 14th Jul 17, 11:11 AM
    To fix or not to fix.... 14th Jul 17 at 11:11 AM
    Morning all

    Newbie here

    Ok so we have
    House value £260K
    Mortgage £151K
    14 Years left to run on interest only

    We could almost clear the mortgage if we wanted to but that would empty our savings pot. Cant get Offset as we only have low wages ( through choice).

    Locked in with Halifax on 3.5% until Feb or a ERC of £1800
    But could switch to 1.99% 5 years which drops £440 a month to £250

    Would you leave it till Feb and try and fix then but need the crystal ball for the rates then available. Saves £11K over the 5 Years
    Or
    Pay now and have the security saves £9.5K over the 5 years.

    By the time the Mortgage expires we will have money come our way to clear it with plenty left over

    Im minded to go with the fix now

    Over to you guys....

    Cheers
Page 1
    • Boredatwrork
    • By Boredatwrork 14th Jul 17, 11:21 AM
    • 263 Posts
    • 418 Thanks
    Boredatwrork
    • #2
    • 14th Jul 17, 11:21 AM
    • #2
    • 14th Jul 17, 11:21 AM
    When I went for a new deal with Halifax, they allowed me to swop over 3 months early, I would give them a call and see if thats possible, that could bring your date back to december. Failing that I believe they do let you lock in a new deal 3 months in advance if you are worrying that the dates would shift.

    Personally pay as much off leaving yourself aound 10k emergency funds in savings, then look for the best deal from there. Even if you dont want to do that at least consider paying the amount off to get you onto the 60% LTV which will get you onto the best interest rates. for when you move onto the next deal.
    But is the money really doing better elsewhere, most probably not.
    Last edited by Boredatwrork; 14-07-2017 at 11:57 AM.
    • getmore4less
    • By getmore4less 14th Jul 17, 11:31 AM
    • 30,265 Posts
    • 18,100 Thanks
    getmore4less
    • #3
    • 14th Jul 17, 11:31 AM
    • #3
    • 14th Jul 17, 11:31 AM
    We could almost clear the mortgage if we wanted to but that would empty our savings pot.

    Whats that money doing now?
    Is paying down the mortgage a better use of it.
    • clairebeth
    • By clairebeth 14th Jul 17, 11:33 AM
    • 134 Posts
    • 46 Thanks
    clairebeth
    • #4
    • 14th Jul 17, 11:33 AM
    • #4
    • 14th Jul 17, 11:33 AM
    I would clear it. You could either pay the £1800 erc now, or wait until February, but by February you will have paid £3000 in interest, so you may as well do it now. Keep aside 3 to 6 months worth of expenses and then put the £440 a month that you're no longer paying in interest into savings/pension.
    • I am sparticus
    • By I am sparticus 14th Jul 17, 11:54 AM
    • 4 Posts
    • 0 Thanks
    I am sparticus
    • #5
    • 14th Jul 17, 11:54 AM
    • #5
    • 14th Jul 17, 11:54 AM
    Ta all

    @Boredatwork - Yes its actually April so the 3 months back is Feb
    @getmoreforless - Bulk in PBonds and the sad XL sheet shows 1.3% per annum. Shares 2% PA and ISAs. So its costs us 1.99-1.3% = 0.69% £89 in real terms to have in in real money than in Bricks
    @clairebeth - Yes fixing now actually makes sense on the monthly saving we would make.

    The general feel is to just pay off the mortgage but we are having a mental block with this. Effectivly we have our own offset mortgage just keeping the money in our own pots albeit we incur a cost of £89 to have this.
    Pay off the Mortgage and everything we have is tied up.
    Or are we just being scrooge like and prefer to look at zeros in teh bank?

    Ta
    • Boredatwrork
    • By Boredatwrork 14th Jul 17, 12:02 PM
    • 263 Posts
    • 418 Thanks
    Boredatwrork
    • #6
    • 14th Jul 17, 12:02 PM
    • #6
    • 14th Jul 17, 12:02 PM
    The general feel is to just pay off the mortgage but we are having a mental block with this
    Which feels better:

    1 Money in the bank and a slow burning debt and interest every month that could go up or down to think about for over a decade
    2 The feeling that I don't owe anyone anything, have saved a bundle in interest rates, with more money coming in each month saving for retirement.

    Total no brainer for me.
    • getmore4less
    • By getmore4less 14th Jul 17, 12:03 PM
    • 30,265 Posts
    • 18,100 Thanks
    getmore4less
    • #7
    • 14th Jul 17, 12:03 PM
    • #7
    • 14th Jul 17, 12:03 PM
    If you are forecasting big input of funds in the future it does not have to be an all or nothing.

    do a cashflow forecast and see how far you can reduce the pot now.

    You have to pay it off sooner or later

    May want to keep some back for loss of income or a project, but how realisic is a project costing £100k+
    Last edited by getmore4less; 15-07-2017 at 12:33 PM.
    • I am sparticus
    • By I am sparticus 14th Jul 17, 10:27 PM
    • 4 Posts
    • 0 Thanks
    I am sparticus
    • #8
    • 14th Jul 17, 10:27 PM
    • #8
    • 14th Jul 17, 10:27 PM
    Now even more confused

    Ok, Right looking at it this way

    The recession hits in a few years as per its usual 10-15 year cycle and house values drop
    1) We have paid off the mortgage and our £260 K house is now worth erm £200K but no monthly payments
    2) Leave cash in the bank, still worth £151K and the equity has gone down to £50K but we are paying a mortgage % on £151K. But could just pay it off if the 15% days returned (12.5% on savings though hmm)

    Head hurts thinking about it. Have always considered money under the mattress is better because it cant reduce apart from inflation. Brick and mortar can reduce wildly

    We are in the construction industry and there is a slight wobble going on, early days but the signs are there

    Wine I think is the answer
    • snickpan
    • By snickpan 15th Jul 17, 12:12 PM
    • 53 Posts
    • 8 Thanks
    snickpan
    • #9
    • 15th Jul 17, 12:12 PM
    • #9
    • 15th Jul 17, 12:12 PM
    Mind you, money under the mattress will lose you money. The basket of food scenario: a year from now, a basket of food may have gone up by 3%, but your mattress stash won't have.
    • snickpan
    • By snickpan 15th Jul 17, 12:12 PM
    • 53 Posts
    • 8 Thanks
    snickpan
    I'm going with your 'wine' scenario!
    • getmore4less
    • By getmore4less 15th Jul 17, 12:37 PM
    • 30,265 Posts
    • 18,100 Thanks
    getmore4less
    The value of your house is not relevant to your net cash position.
    • AnotherJoe
    • By AnotherJoe 15th Jul 17, 1:43 PM
    • 7,590 Posts
    • 8,189 Thanks
    AnotherJoe
    I think you've got far too much money in cash/low interest places.

    I suggest you work out what a 6-12 months expenses would be, reserve that sum then use the rest to pay off a substantial amount of your mortgage now (now because you'll still come out on top even with ERC)

    Then, don't fix that new mortgage on a five year, take a low rate with no fee which will likely be a 2 year term then you can probably pay that off ovr 2-3 years anyway by overpaying as if you were still paying the £151k mortgage since now it's maybe £30k or so (I think you may have issues remortgaging to less than £30k from what I've read). Make sure you get a mortgage with no overpayment penalties.

    Also consider putting some of your money into longer term investments. The fact you have £150k effectively in cash says you are ultra cautious but long term that's not doing you a favour.
    • I am sparticus
    • By I am sparticus 17th Jul 17, 7:03 PM
    • 4 Posts
    • 0 Thanks
    I am sparticus
    Thank you all

    Its so good to hear a different perspective

    Yes I agree the money we have is not working for us but I think this is just from a comfort of having it available rather than tied up. We inherited a lot of debt in a will ( yes it happens) and it cost us over £100K which luckily we had liquid, so now we are twitchy about having money tied up. There could be more debts to pay but doubtful but its left us in an ultra cautious mindset.

    Crunched some figures
    If we fix at 1.99% and continued to pay the usual monthly amount it would reduce our debt by £11800.
    If we put the same saving into a 1% savings account and added compound interest we end up with £11746 after 5 years.
    So the same money but its liquid not Bricks

    Then in 5 years:
    Interest rates go up
    a) Use the saved money + saving to pay off a lump = Control over monthly interest payment
    Or
    Interest rates same ish
    b) Refix again for another 5 years and save the same again

    We would like to buy some Buy to lets as a Pension but not whilst the market is so high

    Cheers
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