Should I pay off my mortgage? Moneysavers, what do you guys think?

Kinkajou

Hi All,

Hope that alls well.
I have, after, years of saving carefully and being really frugal, am now just about able to pay off my mortgage. I have a fixed deal till Oct 2012 with the entire mortgage having 8 years to run. My interest rate is 5.98 and I owe just under £25,000. They allow me to make overpayments each month, so when I can I do and I used that to get the time of the mortgage down.

The best savings rate I can get at the mo are around 3% in easy access accounts or 4.5 with regular savers.

Am I better off paying off the mortgage and leaving myself a bit skint, or continuing to save? If I redeem it now, they will charge me £731.00 early redemption charge. I've read here that some folks say its good to leave at least one pound owing so that a line of credit is available. I am confused, has anyone got any advice they can give me?
Very kind regards

Kinkajou

Cannon_Fodder

Knock £20k off it.

Keep £5k as (or to enhance) your emergency fund.

Kinkajou

:AThanks Cannon Fodder,

That's a great idea, it's always good to have some sort of emergency fund. The morgage guys have kinda got me, as I am only allowed to either make a £500 overpayment each month without penalty, or pay off the lot. If I paid off a partial amount over £500, they'd still sting me with the repayment fee coz I am fixed. I guess I fixed at the wrong time, but I never forsaw that savings rates would drop so low.

Many thanks for your reply.


Kinkajou

beecher2

Does the ERC go down in October 2010 and if so is it worth your while waiting until then?

Would it be possible to cut your remaining term from 8 years to 2/3? If your lender allows it, this would be the same as overpaying significantly.

Charterhouse

When does your fixed rate run out? You probably want to ask your lender about reducing the mortgage term to the same date as the fixed rate ends, which many will allow without a fee. This will allow you to pay it off as quickly as possible without paying a penalty.

Kinkajou

Hi Beecher 2 and Charterhouse, you've come up with great suggestions. I didn't even think to ask if it was possible to reduce the term to match when the fix ends. I really appreciate your help.
Kind regards and thanks
Kinkajou xxx