Mortgage or savings? What should we do?

Andyboy

Ok I am a newbie so be gentle please.

We are in a position where our savings almost match our outstanding mortgage debt but are almost afraid to pay off the mortgage for fear of having no rainy day money and making use of our tax free alowances.

Anybody give us an idea of what we should or should not be looking at doing please?

Andy

[Deleted User]

We have been in the same position. It feels good to have a safety net come what may. IMO build up the savings pot and then deal with the mortgage

*Louise*

Umm...can't you pay off say, half the mortgage, which will bring down your monthly payment, but still leave you money for a 'rainy day'?

Bestthingsinlifearefree

Hi Andy,

I would keep at least 6 months living costs in cash ie so if you had no income for 6 months you could meet all you current commitments ie mortgage,food,bills, and live etc etc from this cash cushion.

If you then lose your job or have a big house repair at least you have a big cash cushion to deal with an unexpected financial crisis.

Once you have this 6 months cash cushion / buffer etc in saved in tax free ISA's.
I would then use any additional cash to pay down the mortgage as the interest on this debt is likely to be higher than any interest rate you can get in savings.

I think you are right to build up a rainy day fund, so you can sleep easy at night.......but make sure you ONLY use it for a very rainy day and don't be tempted to blow it on sunny days in Spain etc etc !!!

Best things in life are free.

(edit I voted for option 3 keep until have more savings than required)

BobProperty

You are extremely unlikely to get as much or more post tax interest on savings than you will pay in mortgage interest. Therefore pay it off. How much "rainy day" money do you expect to need? Surely without a mortgage you can build a fund in a matter of months?
And can you explain "making use of our tax free alowances" please, there aren't too many of them when it comes to mortgages.

Thefunkygibbons

TFG checks signature

I would be minded to pay most off the mortgage

A rainy day fund is 3-6 months of essential expenditure

Once the mortgage is gone, savings can be rebuilt really quickly

skintchick

I agree - you will have the mortgage payment each month as spare, plus whatever you were saving as a regular amount - so pay off that pesky mortgage!

Lucky you...

fagun

I'd go with paying off the mortgage. What you can do (depending on provider) is leave a nominal amount outstanding as an interest only mortgage; then you can borrow back if you have an emergency (bearing in mind it'll take a few weeks for administration). Its worth asking your mortgage lender what options you have.

rchddap1

I'd also pay off the mortgage. Once it is sorted you'll soon claw back enough 'rainy day money' to cover 3 - 6 months.

jellycat40

OOOh I would definitely pay off my mortgage. Then build up your savings again. You will be able to save your mortgage payment on top of your normal savings so it should build up really quickly again. Truly debt free for you.

Well Done

Louise

black-saturn

Pay it off with the savings. Its what I did and now I am rent, debt and mortgage free.