mortgage free in 5 years?

terry-stoke

Hi, part of this query/ask for help has been posted on the mortgage thread, but I still need help.
£31k due november 2011, with Bristol & West, on svr 6.8% I think. Interest only, no vehicle with which to repay. Payments now £170/month, as much as we can afford. My employment is not secure, our total income is only £17, 500 pa, in our very late 50's. Redemption clause now finished (31/8/06), not allowed to make any overpayments, even if we could. house worth £230k or more. Have endowment, not connected to mortgage, worth about £14k, out in november 2009, have investment bond worth £9k, Isa'a worth £5k, cash in bank £5k, cash £5k. We may be just able to repay the mortgage in 2011, but that takes every penny we have, only the measly state pension to look forward to. How could I use the equity we have? I'm thinking of trying to re-mortgage to allow over payments having then found a better rate. Any bright ideas?

Dr.Lou

Just a few thoughts (without going down the equity release route)

Could you let out a room in your home, I'm pretty sure the government will let you earn nearly £5,000 per annum before tax through its rent a room scheme.

Another thought is that I notice you are located in Torquay, would it be at all possible to separate a small part of your home for holiday lets (or move out into cheap rented accomodation during the summer to rent your home out to holiday makers)? - ((I am actually going on holiday to Torbay in a couple of weeks, its such a lovely part of the country))

Also check that your money is in the highest interest accounts possible, if your spouse is a non-tax payer put the money in thier name to earn interest gross (sorry if all this is obvious!)

What would be the redemption fees if you were to remortgage to a better deal?

A_Nice_Englishman

To be honest, I think that if you want to keep your savings and be mortgage free in retirement you will either have to work long enough to pay the mortgage off or move to a cheaper property.

terry-stoke

Dr.Lou wrote:

Just a few thoughts (without going down the equity release route)

Could you let out a room in your home, I'm pretty sure the government will let you earn nearly £5,000 per annum before tax through its rent a room scheme.

Another thought is that I notice you are located in Torquay, would it be at all possible to separate a small part of your home for holiday lets (or move out into cheap rented accomodation during the summer to rent your home out to holiday makers)? - ((I am actually going on holiday to Torbay in a couple of weeks, its such a lovely part of the country))

Also check that your money is in the highest interest accounts possible, if your spouse is a non-tax payer put the money in thier name to earn interest gross (sorry if all this is obvious!)

What would be the redemption fees if you were to remortgage to a better deal?

thanks, waiting to hear.

jamesd

What are the complete figures for the endowment? Insured value, redemption value, estimated value when it ends.

The best cash ISA I know of today pays 5.75%. If you were to put the 5000 existing ISA in that now, add 3000 each now and another 2000 in the new tax year that would gain you 4800 in interest in five years. Rates vary, so this isn't guaranteed and is probably a bit on the high side. This is probably the wrong choice for retirement planning and wrong if you can link repayment to a pension payout. Discuss with an independent financial advisor.

Remortgaging to a pension mortgage may well be a good idea.

What is the investment bond and what can you say about any income it delivers?

Now's also the time to be considering the tax situation after retirement. Some forms of assets don't count towards means-tested benefits so it's useful to arrange for your money to be in those when or if you reach the age where you're eligible for them.

If you're more bold you might want to talk to an independent financial advisor about the possibility of raising your mortgage amount to free money for fairly conservative investments that should still be able to make you more than the mortgage interest rate. It might be fairly hard to get a mortgage more than 75,000 total given your income. The money saved in the house equity is a very large part of the money you have to try to get working harder for you to improve your retirement position.

It may take moving to a different property in the same area to free up a lot of the money. Worth taking a look around to see if that's viable and if there really are any other properties there that you'd want to live in, without disturbing your life too much.

What I suggest is that you talk with an independent financial advisor because your problem is really much more than just the mortgage. It's that as part of getting yourself set up as well as you can for retirement.