Do I really want to make overpayments on my mortgage?

Fraz_2

My existing Nationwide Tracker on a £55,000 interest only mortgage has just last week expired. It has 17 years left to run, the funds I have invested to pay off the lump sum are doing fine and I have a bit more spare money to play with now. I was just wondering on any advice for the following:-
1) Is it good use of my extra funds to pay off some of the balance or should I invest elsewhere?
2) Now I have more cash should I seek out a full re-payment mortgage and ditch the interest only approach?

thanks
Fraz

MarkyMarkD

(1) Even assuming that you switch your mortgage to a good rate, you are unlikely to earn more (after tax) than you pay on the mortgage. But you could keep some money in ISAs (if you're not already fully using your allowances) instead of paying it off the mortgage, and you can get ISA rates higher than (good) mortgage rates.

(2) I don't see any reason to do so. The benefit of being interest only is that it's up to you when to pay capital off - it gives you more flexibility and makes it easier to manage the payments if things are suddenly a bit tight.

Fraz_2

Thanks MarkyMark, that is useful. I think then that I will try and make some overpayments while I can and the going is good in terms of my mortgage ( I am on a fully flexible mortgage until I find a new one). Now to start looking at what is available!

jamesd

Fraz, your investments are working and presumably did well enough during the market downturn so there seems to be no reason to change plans.

If you want some cautious alternative to overpayment the Ruffler Bank cash ISA pays 5.75% with a minimum deposit of 3000. There seems no reason to pay off the mortgage when you can do that and make more interest than you save and it seems likely that that is one or so percent above the mortgage interest rate you will get. It increased promptly after the last rate rise.

roswell

if you want to pay less in interest then YES

Conrad

I dont pay any mortgage capital off yet as I prefer to keep investing.

In the long run I consider this the best strategy. So far so good.
The issue for those that put everything into the mortgage is 'time'.

All to often people of 50 say 'Ive paid off my mortgage but now I havent got enough time to take any risks, so then then are forced to invest in low growth safe arena's which dont give them the returns they desire.

Fraz_2

hey, thanks folks. All good stuff and continually reappraising things here. I think a little bit of overpayment and a little bit of sharp investing may be my way forward. I think Conrad's point about age and options is an interesting one.

escroooge

when I get to 50 I will reduce my equity related exposure (risk Exposure) by 10% each birthday until at age 60 I am safely in bonds and know where I stand.