Mortgage Repayment Poser

tmb2000

Please help!

We have a mortgage of £111,000, half repayment and half interest only, at a fixed rate of 4.29% (ptretty good I think)ending 31 October 2008.

We can reduce it to £100,000 with an £11,000 (10%) penalty free payment in January 2006. Following a recent bereavement, we will soon be in a position to make much larger repayments, possibly even to redeem the mortgage. However, we must pay the mortgagor 3% of the amount repaid as an early repayment charge.

Can anyone advise whether we should stick to three January 10% repayments and earn interest on the rest of the inheritance, paying off the mortgage when the 3% charge has expired in November 2008, OR would we do better to pay off a large part or all of the mortgage early next year? The building society will not provide figures for comparison, or any advice. Many thanks.

canny_yorkshireman_2

this is one for the number cruching crew that live here. just looking at the figures then you are only paying 4.29% on your debt and you can realistically get better savings rates than that so i would be tempted to stick to the 10% overpayments without penalty and find a top rate savings account see site details on best accounts for details by the way can you lend me a tenner :-))

Joe_Bloggs

Have you considered Mini cash ISAs. In these individual accounts you can put £3K per year. Thats 6K total per couple. You can add an additional 3K each after April 4 2006. Martin's advice is here.
the Halifax deal looks good for 5% per annum tax free.
J_B.

Robert_Sterling

Suppose you paid off £111,000

Cost of this move £3330

Suppose you carried on as normal for two years

This is a rough estimate

Pay rather less than 4.29% times £11,000 Times 2

i.e. Rather less than £943.80 in interest

So instead of paying under £500 interest per annum for 2 years

Less than £1000 in two years

You pay £3000 penalty.

CRUNCH



This is crazy.

Hang on to your money

Pay off the 10% per annum if you like.

Do not pay the penaly of £3000

Unless of course some one points out that my logic is faulty and produces convincing contradictory evidence.





This is not financial advice

tmb2000

OK looks like my money management is perhaps better than I thought as all answers recd so far (and a BIG thanks to you wonderful people) back up what I had already suspected.

Where I was not so sure (and thus asked the poser) is how the compound interest works when added up over the life of the mortgage. Was not sure if something was coming back to bite me later.

Anyone else with more thoughts to chip in greatfully recd but sorry no £10 to lend until working out all probate/inheritance issues, (but any advices on that side i.e. DIY or solicitor, dodges, hints) also greatly recd

Xbigman

If you are the sort of person who 'manages' their money. IE you hunt around and switch between savings accounts for the best rate / watches your current account like a hawk, etc, then you are better off opening isa's, getting a high rate linked savings account and paying in the maximum for the year. Basicly taking all the good suggestions from the whole site, then you would be better off just paying the 10% and keeping the mortgage.

But if you are not doing all these things already and you are not the sort of person who is financially astute and organised, then you cannot actually go wrong just paying off your mortgage and living mortgage free. The interest you save isn't taxable, you don't need to apply for anything or remember to stop, start or move anything and you can just enjoy the simple life.
Regards



X