Should I pay off my mortgage?

purplestick

This is messing with my head.

I've had a rather nice tracker offset mortgage with the Yorkshire since 2006 at BOE base rate plus 0.45%: currently 0.95%. Sweet!

There's about £101,000 to pay.

The recession has been kind to me, but I may not have a job within the next 10 months.

I've been racking up extra funds in the offset account by working rather hard and have about £65k there now.

I've about £30k in cash ISAs through HBOS and Santander. So there's about £95k around.

Should I pay off the mortgage?

On one hand, having access to cash seems a good idea. But paying off the mortgage means I won't necessarily suffer when interest rates inevitably go up.

What would the panel do? :undecided:huh::think:

HappyMJ

There are some nice savings accounts paying much more than what you are paying in interest on the mortgage. I'd take everything out of the offset account and save it elsewhere. When interest rates do go up compare the rates if the rate on saving is higher than the rate on the mortgage then keep saving and making free money.

Quick calculation £101,000 @ 0.95% will cost you £959.50 per year

£101,000 invested in the AA at 2.8% will get you £2828 less £565.70 in tax and less the interest you need to pay on the mortgage means you'll make £1302.80 profit for about an hours work in opening the account and transferring the money. Now that is sweet!!!!

pawlala

looks like given your 6k shortfall that you have 10 months max to make that up and then secure about 3-6 months savings for your redundancy period. Is that enough time?

michaels

You will not be eligible for most benefits if you have savings - and paying off the mortgage with capital when you are made redundant is treated as deliberate deprivation of capital and stops you being entitled.

purplestick

@HappyMJ ...for about an hours work in opening the account and transferring the money

I hadn't considered sticking the offset cash elsewhere. Best rate I can find is with Santander at 3.25%... at £1267.50 interest after a year's lock-in. Ooooh, and this tracks at 2.75% above the base rate too, whereas the mortgage tracks at +0.45%. :doh:

@pawlala... looks like given your 6k shortfall that you have 10 months max to make that up and then secure about 3-6 months savings for your redundancy period. Is that enough time?

Hope so. That's another of the cons of paying the mortgage off. At least with cash around I've something to buy food and that.... and as michaels suggests, the DSS don't cater for self-sufficient people, naturally.

:beer:
(looking at baserate term tracker bonds)

dimbo61

If you might not have a job in 10 months then now is the time to pay down the mortgage.
You have £30K in ISA,s so keeping a few thousand in the offset as easy to get at emergency money is not a bad idea.
Try and fill your ISA allowance ( you and OH ) each year but I would pay down a big part of the mortgage ASAP.
PS I am with YBS and have an offset mortgage ( but its fixed) very happy with offset