Mortgage free or savings in the bank?

pantomime_horse

Hi, Could you advise in our early 40's is it best to pay off our mortgage and have little in the way of large savings. or keep our relatively small mortgage (in loan to value terms) and enjoy the thought of money in the bank?

Jock_Tight

Why not 50/50 that way you reduce your mortgage balance and build up your savings. Make use of your ISA allowance for the longer term tax gain.

Depends on whether you can overpay without penalties and what your mortgage interest rate is.

themull1

mortgage free.

dimbo61

You dont give your mortgage rate but unless you get a better rate from savings ISA,s paying 2.8% at most you would be better off clearing the mortgage

pantomime_horse

Thanks for answering - sorry if i sound a bit dim. The rate is a tracker - tracking at BOE rate until Feb next year, then SVR. The mortgage is 113k, and we have no ISA's - the mortgage is also offset and interest only. We both work and run a small business which carries the mortgage so the interest payments are put against the business as expenditure. Still repay?

dimbo61

So you are only paying 0.5% on your mortgage (tracker at BOE rate !) and you have it fully offset with £113K in the offset pot against a £113K mortgage.
Being self employed and having your own buisness is very different from a normal mortgage and you may need cash to pay the tax man,VAT and keep the buisness going in tough times.
I would still reduce the mortgage to say £50K and speak to your accountant.
You can also earn 2.8% in cash ISA,s which is a good start for long term savings when you retire.