Pay off mortgage or...?

littlelily

Apologies if this has been answered elsewhere but I am new to the site! Feel free to politely point me in the right direction if that is the case...

I am shortly to receive a lump sum which will allow me to pay off my mortgage:T

I would appreciate advice as to whether this is the best thing to do. Basically, what's your opinion:

Do I pay it off completely? Or do I offset the mortgage with the lump sum? If I pay it off, what should I do with the money that, in the past, would have been mortgage payments? If you're already mortgage free, do you save the equivalent amount in a high interest savings account each month or is there a better idea?

Your advice, opinions and own experience would be really appreciated!

save-a-lot

Hi

Soon to be in the same situation. Our mortgage rate is 4.67% and I think we can invest by maxing out 2 ISAs, then putting the rest in high interest savings accounts... not sure which ones pay more than 4.67% after tax though? I suppose if you can invest and earn more than the mortgage rate then the answer is to invest. Otherwise pay off as much of the mortgage as you can without incurring penalties. Our limit before penalties is 5% of the outstanding balance a year.

Hope that helps

Mrs_pbradley936

First you need to find out if you would incur any penalities for paying up early.
Then take it from there.

Miss_Penny_Pincher_2

Welcome to the mortgage fee wannabe board, littlelily!

Regular saver accounts would need to pay 5.84% interest if you are a basic rate payer with 4.67% mortgage like Mr Tall:

A&L - a huge 12%! ( pm me if you want me to refer you for an extra £50 opening bonus )
Lloyds TSB - 10%
Barclays - 10%
HSBC - 8%
Halifax - 7% (don't need to open their current account)

Thefunkygibbons

I am now mortgage free, and I have redone my budget to identify how much I should be saving each month

That is going into a mix of savings
Rainy day instant fund
ISAs for me and the beloved
Stock market for the rest

I also have a few preminium bonds somewhere

I think a range of products is best

blessings3

Miss Penny Pincher how do I PM you for a ref to A&L thankas

littlelily

Thanks for all the responses so far! I really need to get my head round the figures and learn a bit more about the different types of savings available. not sure if it makes any difference to the figures, but we have an offset endowment mortgage. I presume we should keep up with the endowments after paying off the mortgage? I am a basic rate tax payer, hubby is a higher rate tax payer - does this affect whether we take out savings accounts in his name, mine or both?

I WILL get there - eventually!

Mrs_pbradley936

Yes you should keep paying the endowment. Any savings should go in your name so that you get the interest and pay tax at the basic rate. I think you should keep some money for easy access in emergency and look into a 5 year bond. Barclays sent me details a few months ago but I did not take one out (no spare few thousand) the rate was very good but you could not touch it for 5 years without spiteful penalties.