should I pay off my mortgage?

dj2006

..or to put another way, is there any reason why I shouldn't?

It's only about £33k, I'm enjoying a cracking 1.04% rate at the moment, it's £18k interest only (I have an poor performing endowment) & the remainder is repayment. I have enough cash lying around at the moment to pay it off with some to spare, & that seems the obvious choice but thought I'd check. The money I have is scattered around, some in an offset account that comes with the mortgage, some in premium bonds (yes yes I know), some in an ISA & some in 'normal' savings.

Things to consider,
a) I've been tempted to buy another buy to let (I have one already), so would use these savings as the deposit etc, although I'm now leaning more towards buying a place to live & renting my current place out.

b) I’m concerned about my job, & there is a risk I’ll be out of work next May, so should I be holding on to any savings I have just in case?

Any suggestions gratefully received

JimmyTheWig

Plenty of reasons not to pay it off! The main one being that you can earn more money on your savings keeping them as savings than you would save by paying it off.

If you pay it off then you'd save yourself £28.60 a month in mortgage interest.
If you put that same £33k into a savings account where you earn 3% net (given that you've got money in ISAs this shouldn't be too hard) then you'll earn £82.50 a month.

Other reasons to not pay it off are that you'd lose liquidity (important given concerns over your job) and you can't get back previous years' ISA allowances.
What reasons have you got for paying it off?

dj2006

Thanks, no reasons really other than a natural tendency to get rid of debt, but it's such a good rate being a 0.54% tracker. I'm up to my max on the ISA, I'll check out other accounts though. I've also just seen the offest calculator, so will give that a go

JimmyTheWig

Have you heard of stoozing? Many people on here do it.
Basically it means taking on debts at a low rate of interest (normally 0% credit card deals) and earning better interest on the money before paying it back.
Debt isn't bad. Only bad debt is bad.

Offset mortgages are great in some instances, but here this won't help you. In terms of liquidity it would be better than paying the mortgage off, but in terms of money you'd be just as poorly done by as if you paid it off. In effect you'd be getting 1.04% net on your savings.

Now, you may think that £50 a month is a small price to pay for physically being mortgage free. If that is the case then by all means go ahead.
What you may prefer to do is open a top paying savings account and stick £33k in it. So while not physically mortgage free you would be logically mortgage free. And £50 a month better off!

Peelerfart

If you think you lose your job then having money sat in the bank may affect your entitlement to benefits.
Not sure what the cut off amount is but I think it's £16,000 .Check this please, as I'm no expert.

benjo

Peelerfart wrote: »

If you think you lose your job then having money sat in the bank may affect your entitlement to benefits.
Not sure what the cut off amount is but I think it's £16,000 .Check this please, as I'm no expert.

You are right,

16k = no income related benefits (ie means tested).

Between 6k = 16k income related benefits are titrated.

Less than 6k in savings/investments and full income related benefits are payable - to those meeting the other criteria.

dj2006

thanks all, I'm on the case now..

JimmyTheWig

Peelerfart wrote: »

If you think you lose your job then having money sat in the bank may affect your entitlement to benefits.
Not sure what the cut off amount is but I think it's £16,000 .Check this please, as I'm no expert.

Do you live on your own?
If not, does your partner work?
If they do then you are unlikely to get any means tested benefits anyway. In which case I think you are better off with the savings in the bank.

Cannon_Fodder

If unemployed, you get 6 months JSA, irrespective of savings, as long as you have made enough of the right National Insurance contributions. Called contributions-based JSA. Then income-based JSA kicks in, and your savings will count against you...