Debt free - should savings pay off mortgage

ViolaLass

You haven't been misinformed. Here's an example.

Debt of £100k, you can save £15k per year.

1. If you continue to offset your savings, in three years time, you will have £100k debt and £45k of savings offset, meaning that you will be paying interest on only £55k.

2. If, on the other hand, instead of offsetting your savings, you hand your money to the bank and say "Please take this amount of the £100k debt" then by the end of three years you will have no savings and £55k debt.

Do you see that it's the same end result? The only difference is that in the first scenario you still have access to your savings and would be allowed to withdraw them for whatever reason you want (emergency, holiday, wedding, whatever). In the second scenario, you will not have easy access to the money you have given the bank (you could remortgage to get it back) but the amount of money on which you are paying interest is the same.

clarec

Thanks to your replies I finally get it now, this clearly isn't my area of expertise! I will keep the savings in my account rather than pay it off. In terms of my monthly mortgage payment should I pay interest only (about 250) or 550 which would mean the house is paid off in 25 years time. Sorry if this is stupid question.

ViolaLass

Whether you pay the capital off each month or save the £300 and offset it MAKES NO DIFFERENCE. The interest you will be charged the next month will be the same. If you want to pay your mortgage off in ten years, as you mentioned earlier, then you can either give the bank the £300 every month or offset it and give them the lump sum of £100k when you have it.

I'm going to stop posting now unless you have any new questions as I feel I've been saying the same thing for a while.

clarec

Thanks just wanted to make sure