Advice please

STRAWB

Our current mortgage is up for renewal in 3 months we have £35k left over 9 years on a tracker approx paying £400 month we have 30k in isa's and 15k in other savings all earning very little! My dilemma do we use our saving and pay off our mortgage and be free:D which will still leave us £10k for a rainy day or keep the saving and just plod along as we are! We have mixed thoughts. At then end of the day if we just save the £400 a month that was going on our mortgage in 9 years we would have £43000 back.

CLAPTON

basically if your savings are earning a higher AER that you are paying APR on your mortgage then keep the savings otherwise pay off the mortgage

StuartGMC

Whilst Clapton is theoretically correct you need to consider a few things I think. Firstly, you are at or below the minimum mortgage loan many will offer and secondly any fees will be a significant % of the remaining capital owing.

You could look at offset especially those which allow you to offset the Cash ISAs (which remain in their wrapper so you can benefit once mortgage is cleared), your savings and your current account. You then benefit initially when interest rates are low and you aren't seeing much interest earned, but you will be 100% offset so you won't pay any interest on the mortgage. This means you can then continue paying down the mortgage and accumulate more savings so you can pay off early. Remember most offsets will not have an ERC either.

You can do the effective interest rate calculation if you wish for interest lost on the savings/ISAs when offsetting.

I'd imagine you can build the savings a bit more, overpay and be MF in say 3 yrs, whilst retaining the Cash ISAs too.

Good luck on the research and let us know your decision.

STRAWB

Oh god never heard of a offset can you explain in simple terms lol

StuartGMC

I think you'll find it described in the mortgage article on this site. Succinctly, it works this way:

1) You owe X on the mortgage which costs x% interest
2) You have savings of Y which generate y% interest-tax

However, if you offset then you only incur interest on (X-Y) so a fraction of x% or in your case x=0.

NatWest has information thus:
http://www.natwest.com/personal/mortgages/g3/flexible-mortgages/offset-flexible.ashx

Hope that helps a bit.

littlemrtinkle

pay off your mortgage, why have that hanging over you. Get rid of it