Paying Off Mortgage or Saving Now?

Simba1978

Hi

I have a Tracker Mortgage and my payments are decreasing with the B0E rates dropping. So i was wondering if it was a good time to pay more off my mortgage now keeping in mind that house prices are also dropping, or should i save the savings i'm making due to the low interest rates?

The Question is basically should i keep my money liquid or tied into the house?

Thank you

beecher

If you can find a savings account which has a higher interest rate than you're paying in your mortgage, then it makes sense to save the money. Nothing to stop you paying off your mortgage with the savings at a later date. I'd advise using an account you can't dip into - I'm putting mine into a Halifax Regular Saver which can't be touched for 12 months.

silvercar

If you think there is the faintest chance you will need the money then keep it in savings.

A friend had saved sufficient to clear his mortgage, had moved all his money to instant access ready to clear his mortgage after his fixed deal ends on 31/12/08. He found out yesterday that he is being made redundant 28/2/09.

Cannon_Fodder

make sure you have a 6 month "emergency fund" before you start overpaying - possibly more depending on your industry, ease of re-employment, mortgage protection insurance, etc.

Dithering_Dad

Cannon_Fodder wrote: »

make sure you have a 6 month "emergency fund" before you start overpaying - possibly more depending on your industry, ease of re-employment, mortgage protection insurance, etc.

Top advice. I'd also add that you should make sure you have adequate pension provision. Mortgage overpayment should be carried out with spare money, you should not be depleting savings, retirement plans to do it or you're simple 'taking from Peter to pay Paul'.

bacard1

our mortgage allows us not to pay, if we have made over payments. So if things got really bad i could just stop paying untill i had used it all. Our mortgage is @5.14% so i save that on the over payments. You do not say what your tracker is at, at the moment (%). However it must be really good to be mortgage free

Dithering_Dad

bacard1 wrote: »

our mortgage allows us not to pay, if we have made over payments. So if things got really bad i could just stop paying untill i had used it all. Our mortgage is @5.14% so i save that on the over payments. You do not say what your tracker is at, at the moment (%). However it must be really good to be mortgage free

I'd make absolutely sure of that in your Terms & Conditions if I were you. Most mortgages allow payment holidays but have a maximum allowance. Mine only allows 2 payment holidays per year and I would have to give then 1 month's notice before doing it.

Other mortgages allow you to retrieve the overpayment money, but in the small print they say you have to pay an admin charge and that the interest rate on the returned money could be different from your mortgage rate (i.e. you get the returned overpayment on one of their newer mortgage rates).

Be careful, mortgage providers are as slippery as eels!! :eek:

bacard1

Many thanks but i have no intention of not paying anyway, and I was trying to point out a option of our mortgage. I have just re-read and it says i can underpay as long as the underpayments do not exceed the overpayments. I assume that they would rather me underpay if i had overpaid as they would then get more interest.

However i do not want hi-jack the op thread, if it was me i would want to mortgage free asap. It all boils down to how good the op's tracker rate is.

many thanks for you concern

Dithering_Dad

bacard1 wrote: »

Many thanks but i have no intention of not paying anyway, and I was trying to point out a option of our mortgage. I have just re-read and it says i can underpay as long as the underpayments do not exceed the overpayments. I assume that they would rather me underpay if i had overpaid as they would then get more interest.

However i do not want hi-jack the op thread, if it was me i would want to mortgage free asap. It all boils down to how good the op's tracker rate is.

many thanks for you concern

Sorry, I thought you were replying to Canon Fodders suggestion to have '6 months emergency savings' point and implying that your emergency savings were stored within your mortgage. My mistake

Incidently, for those who are doing this, while it is a perfectly valid place to store them (and very money saving if your mortgage rate is high), please make sure that it's easy to get them back out again at short notice and with no tie-ins.

As you're

Peelerfart

Just like Beecher, I'd thought of
" putting mine into a Halifax Regular Saver which can't be touched for 12 months."

As we're overpaying the mortgage by about £500 a month which is the max allowed under the Halifax, you don't have to be a genius to work out that £6K plus interest off the mortgage after 12 months - lovely !.

But, I have a mental picture of trying to explain to mrs fart why I simply HAD to have that Harley-Davidson :j

Maybe I'll just overpay - it's safer for me (and my soft and danglies )