I can accelerate my MFD but should I?

KGPUMPS

Hi All, first of all as a newbie I have to say what an excellent forum, well done all!

Here is our situation;
We have already paid a 48,000 lump sum off of our 92000 mortgage in July 2008. We did this with no penalty as we were allowed to make any over repayment in the last month of the fixed deal.

We are lucky enough (although sadly through inheritance) to have stashed away 29,000 in Legal & General ISA type accounts, and 20,000 in a 5 year fixed bond with NW.

On our current deal of 15 years with the first 5 years fixed at 6.5% which started Aug 2008 we can pay a max of £500 over or take a penalty of 2% above that.

I can see we have enough to pay it right off, taking around a £880 overpayment charge, but is this the right thing to be doing?

It is lonely out here, and our building society of course advices us to pay the £500 max with no penalty.

Any advice truely welcome

wynnvegas

Looks a no brainer. For an overall hit of £880 against the interest you'll pay in even the first five years at 6.5%, it has to be worth doing unless you have any other major financial plans to use the money on.

StuartGMC

My only comment would be that you retain / build some emergency funds before you clear it all down. You need to work out what this would require, but typically recommendation is 3-6-9 months outgoings dependent upon the degree of job security you have.

Remember, you can only rebuild the ISAs at the maximum rate per year.

Will you take a penalty on exiting the fixed bond with NW?

Have you considered whether moving the mortgage to an offset provider which allows Cash ISAs to offset so you don't pay interest but they remain wrapped in the tax-free container, plus your £20k savings and current a/c such that you are not paying any interest on the mortgage would be worthwhile? You can then pay down the mortgage at a rate to suit you (usually no ERC or OP limits) yet keep those ISAs for when you are MF.

You need to look carefully at all the costs for this, and it may not be worthwhile overall but certainly worth a little time to review.

Best wishes