Paying off the mortgage

guy-taliesin

OK I'm all set to pay off my mortgage, but ...
There's five years left to run, it's a straight repayment mortgage. Total amount outstanding is just over £20k - and payments over the next five years add up to... just over £20k.
Does this mean that I have effectively got a £20k interest free loan. Am i better spending the £20k on something we need - a new car maybe - than paying off the mortgage?
Or just leaving it in high interest account where it is at the moment getting 5.15 per cent interest.
It can't be that simple can it ?

Robert_Sterling

OK I'm all set to pay off my mortgage, but ...
There's five years left to run, it's a straight repayment mortgage. Total amount outstanding is just over £20k - and payments over the next five years add up to... just over £20k.



Does this mean that I have effectively got a £20k interest free loan.NO
Am i better spending the £20k on something we need - a new car maybe - than paying off the mortgage?
That is a judgement for you.
However if you pay off the mortgage and then take a car loan at a higher rate than the mortgage interest rate you would be worse off.

Or just leaving it in high interest account where it is at the moment getting 5.15 per cent interest.
It can't be that simple can it ?Yes it can

tanith

Have you taken into account any charges your lender may put on for early repayment? :eek:

mountainofdebt

guy-taliesin wrote:

OK I'm all set to pay off my mortgage, but ...
There's five years left to run, it's a straight repayment mortgage. Total amount outstanding is just over £20k - and payments over the next five years add up to... just over £20k.
Does this mean that I have effectively got a £20k interest free loan. Am i better spending the £20k on something we need - a new car maybe - than paying off the mortgage?
Or just leaving it in high interest account where it is at the moment getting 5.15 per cent interest.
It can't be that simple can it ?

What interest rate are you paying on your mortgage? Do you have any other debts?

Are you in any penalty period with your mortgage company?

Personally we've come into some money which will pay off our mortgage and the thought of not paying a mortgage any more is so pleasing I can't tell you how good it is.

At the end of the day the decision is yours but I would weigh up all the options and then decide.

A_Nice_Englishman

I can't see how the total of the payments due on your mortgage can be the same as the amount outstanding. Lenders are just not generous! I would check the figures again.

Personally, I would pay the mortgage off. The day I went into the bank, asked how much I owed them and wrote out a cheque for that amount was one of the best of my life!

tanith

I had the same thought but then again thought I might be missing something totally obvious and didn't want to appear a complete plank:rotfl:

Ian_W

It's the opposite end of the spectrum from the question often posed here by folks beginning a mortgage, which goes something along the lines,
Is it worth having a repayment mortgage in the early years as so little of the capital is being paid off - it's nearly all interest?

Mortgage interest is front loaded as you pay interest on the reducing balance so in the early years mainly interest being paid, latter years mainly capital, with the middle years more evenly balanced twixt the two.

In strictly moneysaving terms, if you need a new car and are going to get one anyway it's probably better using the cash for that if you can't get interest free or very low cost credit. However, as said earlier, being mortgage free is a great feeling.

guy-taliesin

Many thanks all. I've done the sums again - I still can't believe it either - and my repayments over the next five years do match up to the total amount owing, bar about £500 quid. My heart tells me to pay it off, my head tells me I will make £4500 in interest by keeping the cash in a high interest account over the next five years. But I'm still sure it can't be that simple...

Rick62

Maybe you have Early Repayment Charges if you pay it all now? Check the interest rate and check any restrictions on reducing the balance. It is generally better to reduce the balance than leave the money on account, you will be paying tax on the 5.15%. Buying your car with your mortgage the interest will probably be lower than a car loan, but remember cars will lose over half their value within 3 years (maybe more with new 'green' taxes).