Paying of my mortgage early

Hardup_3

We have three years left to pay on our mortgage.
Just received the yearly statement today , and , we've worked out that by paying it off now , we would save £2,500 (approx)
This would mean paying the outstanding £10,000.

There is a school of thought that paying off your mortgage early is not wise because if one of us were to die , the mortgage insurance would clear the mortgage , and the survivor would still have the ten grand in the bank.

Can I ask for thoughts on this please ?

I really would love to be rid of the mortgage , but , having that ten grand in the bank has it's security-blanket feel.

My husband wants to pay it off and save the monthly mortgage payments into an ISA ( £300 pm )

So...
What would you do if you were in my shoes ?

Hardup

susank

Surely if we die even after mortgage paid off the insurances/endowments will pay out too so you still save the interest and the monthly mortgage payment. I plan to do this when I receive money owed shortly by an inheritance and will save 6 years on my mortgage and I will be completely debt free - this will enable me to save the mortgage payments every month for other things.

Joe_Bloggs

@Hardup
For £10000 @5% over 36 months (£300 pm payment) gives a total of £790 paid in interest over the three years.
Where do you get £2500 approx from ?
J_B.

Hardup_3

Sorry , I didn't make myself clear.
Yes , we also have normal insurance , but we also have insurance for the mortgage , that , if one of us dies , the house is automatically paid for ( the ordinary death insurance money being seperate )

Is it a better feeling to already have the money in the bank ( my £10,000 ) or , be dept free and start saving up hoping that no *emergency* money is needed in the meantime ?

Hardup_3

Joe_Bloggs wrote:

@Hardup
For £10000 @5% over 36 months (£300 pm payment) gives a total of £790 paid in interest over the three years.
Where do you get £2500 approx from ?
J_B.

I was ( wrongly ) working on the fact that we had paid £720 in interest the last year ( according to the statement ) and I multiplied that by 3 ( years )
Of course , it would be less because we would have paid off another year by next June , therefore bringing the interest total down and the next and the next

Bear with me , my maths ain't that good.

The main point is , do I save all the interest I would have paid by paying off the mortgage now , with my *comfort blanket* ?

Hardup_3

Meant to add..

The interest rate on the mortgage is 6.5

Miss_Penny_Pincher_2

Hi Hardup

Personally I would go for it!! But then I'm a raving mortgage free wannabe and hate being in debt to the bank, worrying house could get repossessed one day etc!

You could always save extra hard for the first few months and then your security blanket will be back... but I can appreciate that worry.

Cara79

Hi there

Personally, I would pay your mortgage off also. I know what you mean about mortgage insurance paying out if you or your hubby die, but you'll be paying the mortgage off in 3 years anyway....so what does it matter?

That insurance is there to protect the house really so that the other person can still live there. I.e. I think I'm right in saying if you / your hubby died now, then they'd only pay out £10k to repay the mortgage not the original amount.

Anyway, I think it'd be great to be mortgage free.

x

Hardup_3

I think I am worried because I retire in 3 years , and my job is not that secure , but , the mortgage would still have to be paid , in or out of work..
Tis a dilemma..

I just want other folks thoughts on this , sort of...
"Well , someone on MSE said..."

Joe_Bloggs

I had to guess at the 5% figure but it gave round numbers that agreed with your figures. Very few would contemplate paying more than 5% if there was an alternative, given current rates and perfect cirumstances.

£9789 @6.5% would be 36 months @ £300.02. Total interest over three years now close to £1011.
The question is can you get a higher,safer, guaranteed return for your other money elsewhere that can beat the 6.5% you are paying on this debt ?

If it costs you nothing in early repayment charges then pay off a significant fraction and see how it feels regarding the financial blanket. Some feel they require a lifebelt and a blanket. Others require a blanket, lifebelt and lifeboat.

The early repayment charges and fees for closing the mortgage should be in the statement.

Congratulations on being so close to ending your mortgage. There is a Mortgage-Free Wannabe forum that could be of assistance in this situation.
J_B.

Hardup_3

Joe_Bloggs wrote:

Some feel they require a lifebelt and a blanket. Others require a blanket, lifebelt and lifeboat.
J_B.

I'll let you guess which one I am

Many thanks for your input and advice , I really do appreciate it.
Thanks everyone.

Will discuss it over the weekend , and make a decision on Monday.



You have all been real friendly , thank you..