Paying off mortgage with savings

shoney

Hi,

My dad has £19k in savings which he would like to pay off a £28k mortgage in a lump sum but he's unsure how to go about it. This would involve a re-mortgage because his current mortgage's interest rate is about to shoot up to 7%.

Does he pay off £19k to his current mortgage company and then re-mortage for £9k or re-mortgage for £28k and then pay off the £19k?

Thanks for any help.

m_13

There is a minimum amount that a mortgage can be and for many companies this is £25k. There is also a minimum term.

If your dad pays off £19k he may well go below the minimum amount. His best bet may be to go for an offset mortgage where the £19k will sit in an account and he will not pay interest on this portion of his mortgage. The clear benefit is that should he need it he can get to the money whereas if he pays it off he can't.

shoney

m_13 wrote: »

There is a minimum amount that a mortgage can be and for many companies this is £25k. There is also a minimum term.

If your dad pays off £19k he may well go below the minimum amount. His best bet may be to go for an offset mortgage where the £19k will sit in an account and he will not pay interest on this portion of his mortgage. The clear benefit is that should he need it he can get to the money whereas if he pays it off he can't.

He actually has £25k in savings but after a look on MoneySupermarket for re-mortgaging I found out that the mortgage must be a certain amount of the house value. This worked out to be £9k, therefore leaving £19k to pay off the mortgage.

We decided that the £9k mortgage should be over 6 years because it would take that long to to replenish the £25k savings by paying a set amount into an ISA. I wasn't sure if there was a minimum mortgage amount but I'm glad that you've mentioned it so I can look futher into it.

To be honest I've never really come across an offset mortgage but I will research it now.

Thanks!

getmore4less

Watch the fees, on a mortgage this low they make the effectve rate a lot higher for such a short term loan.

If the money is allready in ISAs might be worth keeping it that way

ISAs can be offset with some lenders

Is he sure the rate will go to 7%, who is the morgage with.