pay off mortgage or keep savings

annitahamnett

I have £20.000 in savings, which is the same as i owe on my mortgage i am in a dilema as to whether to pay off the mortgage or keep my savings in case i need them.

David_B_2

Very nice situation to be in, I guess it depends whether you want a mortgage around for much longer and what your paying? I suspect that if you have no monthly mortgage costs then this could be saved as well as your originally monthly saving deposit. What about paying 3 quarters and leaving a little savings until you build it back up again and then paying it all off? Personally (if it was me) I would pay off as much as I was happy with (13k) leaving enough savings to cover events whilst I upped my mortgage payment to pay the rest off and then become MORTGAGE FREE.

dunstonh

If savings rates beat mortgage rates, then keep the savings.

If savings/investments are in the ISA tax wrapper, then its usually worth keeping the ISA as it is a use it or lose it allowance which can save you a lot of money over the years.

If you may need the money in the next 5 years then keep it in savings.

grade15

y not pay ur mortgage off by 10K..then 10K for saving is enough..and 10K off ur mortgage is good too!!both world's r happy

kingl_2

If mortgage rate is greater than savings rate (likely) then pay off the mortgage, otherwise keep the savings. In practice keep a bit in the mortgage account to keep it open and let the BS look after the deeds.

Then, keep on paying the mortgage amount, but pay it into a regular saving account or an ISA or whatever. That way you maintain the discipline for saving.

The need for an 'emergency fund' is overstated imho, something which Martin Lewis tried (but failed) to convince Jeremy Vine last Friday. Anyone owning a house with no mortgage will always be able to lay their hands on some 'emergency money'. Besides if an emergency need does happen, you will have already saved a number of months 'mortgage' payments into your savings account won't you?

This is why I am so pleased that I have got a One Account. I have paid the mortgage off, but know that I can simply write a cheque out for £150k if I want to at any time. I don't, but you never know.

dunstonh

The need for an 'emergency fund' is overstated imho, something which Martin Lewis tried (but failed) to convince Jeremy Vine last Friday. Anyone owning a house with no mortgage will always be able to lay their hands on some 'emergency money'. Besides if an emergency need does happen, you will have already saved a number of months 'mortgage' payments into your savings account won't you?

If only it was that simple.

rmh_3

Martin is wrong saying not to keep an emergency fund!
You SHOULD keep an emergency fund. If you lose your job then you would find it very difficult to increase your mortgage or get a loan!

rmh_3

If your savings rate is less than double your mortgage rate you would be better off paying off a lump sum from your mortgage.
If your savings rate is more than double your mortgage rate - keep the savings.
E.g
Mortgage £50000 @6% = Paying out £250/month
Savings £10000 @9% = Gaining £ £83 /month
Real Outgoings £167/month

Mortgage £40000 @6% = Paying out £200/month
Savings £0
BUT you are now saving £50/month as your mortgage is less - so pay this into your savings
Real outgoings £150/month - you are better off

Nix

Sick and tired of an under performing endowment mortgage, we decided to take matters into our own hands.

Swapped to a flexible repayment mortgage with no penalties for overpayments etc.

Cashed in the endowment (great feeling that! ) and put it towards the new repayment mortgage. Then thought, "what the hell," and worked to bring the mortgage down to such a point that we now only pay £50 a month. Easily managed.

Beauty of this is that, come some emergency or other, we can instantly access a goodly sum if we wish. Obviously, the closer the date that your mortgage expires, the less you can access so, in the meantime, build yourself a nice savings account or other. We found this the best overall compromise where WE are in control, not someone else.

There are other options for investing but they never quite have the access/guarantee that you'd like so why bother?

Good feeling not having a big iron ball around your neck - go for it! :dance: