Abbey interest only mortgage-advice on paying some capital

Robbelc

I guys, my wife and I have a interest only mortgage for £163k, for 23 years, and have no way set up of paying the capital. Due to my wifes hefty debts we can't afford to pay off the capital aswell. We don't plan to move at all, and the plan it to sell the house when I retire and use the equity to move to a small flat in the sun.
I have around £150 per month that I can save. It will be atleast 5 years before my wife can save.I have been told there is a savings pot associated with our mortgage that will be offset against the interest? Is it worth using this for such small amounts? Or is it worth investing the money in a ISA, or some other investment tool?
Need some sound advice on this.

koexelek

Depends what the rate is on your mortgage.

If you are a basic rate taxpayer, if you can invest money safely at more than 125% of the mortgage interest rate, you are better to do that.
If you can't, pay it off the mortgage

Robbelc

Hi our mortgage is at +.25 BOE base rate, with no tie ins. I am a basic rate tax payer. Im just getting obsessed with paying something off the mortage!

What about the dreaded indowment? Are they still sold, and at more realistic projected return rates? Is it possable to take out a endowment that will not fully pay off your mortgage and can be surrendered well before the end of the mortgage is due without massive penalties?

koexelek

That means you are paying 5.25%.

With 20% tax deducted at source, that means you would need to get 6.56 % gross on savings to beat the mortgage.

Obviously, on a cash ISa you'd get the interest with no tax deducted though, so would only need to beat 5.25%.

If you pay money off the mortgage regularly, the saving will compound though ( as Abbey calculate interest daily)

dimbo61

You and your wife have 2 debts.
1 is the debts your wife owes and I bet they are costing more than 5.25% and your interest only mortgage of £163k at 5.25%
Simple answer is to clear your wifes debts first
then save into ISA,s paying at least 6.25/6.5% 2x £3600 each year
then overpay on the mortgage if allowed.
Your mortgage deal is very good in todays market so clear her debts first and stop her spending more than you are earning or no RETIREMENT IN THE SUN.