Mortgage paying off advice needed please


I was hoping to get some advice on this 1...

Our mortgage is currently £103k, its a lifetime tracker repayment with Woolwich, paying 0.67% above the barklays base rate (which has been the same as the bank of england base rate), we have no limit or penalties on overpayments and have been overpaying each months as much as the monthly payment of just under £800

At the current rate we're paying and assuming interest rates remain the same, we'll be mortgage free in 6.5 years

However, we have just under £50k in savings, earning some measley 2%/year in ISA's, and no provision for a pension.

So our predicament we put £45k from our savings into the mortgage (leaving some £5k aside in savings), this would reduce the balance to £63k and if everything goes to plan we anticipate to be able to pay this balance off in 2.5years and be mortgage free. We than plan to start saving and purchase a few buy-2-let properties as a pension fund. we keep our savings in ISA's and keep an eye on the property market in case something worth purchasing becomes available?

What would be wiser to do?

Thanks in advance for any advice offered...


  • dimbo61dimbo61 Forumite
    12.4K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    As you are only paying 1.17% on your mortgage it may not be worth taking your savings out of TAX free Isa,s to clear £45k off the mortgage and leave you with only £5k in savings.
    Even if you are only getting 2% tax free thats more than you are paying on the mortgage.
    I would carry on overpaying and keep the savings BUT watch your mortgage and ISA,s rates and try to get the best savings rates HSBC 3.1% at the moment.
    To get a BUY TO LET you will need a 25% deposit ( some of your savings !!) and the mortgage is not based on your income but on the rental income compared to the mortgage costs.
  • JonbvnJonbvn Forumite
    5.6K Posts
    Part of the Furniture 1,000 Posts
    Transfer your ISA's to better paying accounts. Newcastle BS is offering 5% ATM.

    It is best NOT to pay-off a loan with lower interest (with money from your savings) than your savings interest rate.

    IMHO BTL is not a good idea for a pension ATM. That boat sailed a long time ago!
    In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:
  • StuartGMCStuartGMC Forumite
    2.2K Posts
    I think you may want to get some IFA advice on this as it has the potential for significant impact.

    With the ISAs you're earning some interest and of course the money is available whenever you need it. If you moved it into a SIPP etc would you get any uplift from the Government in terms of tax adding to the value of the amounts, although they would then be locked into the pension restrictions...

    Remember that even with the lift on ISAs from next year, and assuming you both have them, then it will take 5yrs to save £51k in Cash ISA alone to get you back to your present position. I think, in consideration of no pension provision presently you should look to keep funds.

    Do you have an emergency fund in addition to the £50k in ISAs?
    What other savings do you need for known replacement items like a car, your annual holiday, home items (kitchen, fridge) etc?

    What about other investments in Funds in ISAs? If you are happy with some risk you could look at getting some Funds under S&S ISAs so the gains are tax free;in general if you are looking 5-10yrs out then now is potentially a good time to be buying whilst markets are low and you can then get the growth once it lifts - see my thread showing recent graph of the change in value of ours since Dec 2008.... and plenty of comments there in terms of why we are paying into the Funds ISAs, and offsetting/OP on the mortgage, but in our case we don't have Cash ISAs....

    In summary, I think you do need to consider this in the broadest context of your financial planning, and, unless you are happy to plan yourself, I feel you should look seriously at getting some IFA input, even if only on a paid 1hr basis?

    Best wishes.
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