Mortgage pay off advice please

dnkstone

Hi,

Lurked here for a while but our first post (so hello!) looking for some good advice.

We currently have a 7 year old offset mortgage that originally owed 110k on a property purchased for 160k - through overpayments etc, this is currently down to approx 67k.

We currently have about 12k in the offset mortgage and a further approx 33k in cash ISAs / a 2 yr cash ISA due to expire soon.

I also have an endowment policy that has run for many years from a previous house purchase that, if surrendered would provide about 12.5k even though approx 10.5k has been paid in (terrible decision).

In total, that amounts to approx 57.5k. Our mortgage rate is about 0.8% at present as it is base rate + a small amount (a good decision). We overpay by £300 a month.

We have no other debts

Would would be a good course of action at this point in time?

Thanks,
dave and kath

originalmiscellany

What's your opinion on interest rates rising? I imagine that your ISA's are yielding higher than 0.8%? If you think rates are going to stay the same, I'd keep the overpaying as it is, but if you think interest rates will shoot up, I'd cash in the money to get the mortgage down to say a hypothetical 67k-33k = 34k which would be eaten up quickly with £300 overpayments and anything else you can throw at it.

most people on this board are wary of debt, so generally the answers you will get will be to clear the debt as soon as possible...

ViolaLass

Assuming your mortgage rate is variable, I would keep as much money out of it as possible and invest it elsewhere (ISAs etc). Add it to the mortgage when your rate goes above what you can earn on your savings. As it's an offset, you could even take more out and put it in accounts that will earn you more than 0.8% after tax.

Jonbvn

Agree with the above ^^^^

It is madness to offset or OP a mortgage with an IR of only 0.8%. You can much better rates in savings. Have a look at LTSB Classic Vantage, regular savers and cash ISA's.

SeriouslySeekingtoSave

With that kind of mortgage rate I wouldn't put a penny into overpaying. Even with the crappy returns on investment you must be able to do better elsewhere!

getmore4less

Whlie rates are low keep saving elsewhere no point in offsetting

Currently you can get close to 2% net above what you currently pay.

even a simple instant access will pay 2.5% so 3% net that 1.2% more than the mortgage is costing

Look at a few monthly savers they are usualy good rates.

Savings rates will track up as well so there is a chance you can keep this going for a while.

I would try to keep the ISAs intack and use every years allowances they are a use or lose and have a tax benifit long after the mortgage is paid off.

If you have to move them around you can get some between 2.5% and 3% that don't have any bonus so don't need moving after ayear unless the rates don't go up.


Who is the lender?

If barclays/Woolwich if rates go against you you can offset the Cash ISAs while you pay down the debt and keep them intact.

ViolaLass

originalmiscellany wrote: »

most people on this board are wary of debt, so generally the answers you will get will be to clear the debt as soon as possible...

I think you've misunderstood the advice given on this board if you think the MSE way is to always pay down off debt asap. Collecting enough money to pay it off is sensible - actually handing it over to the bank before you have to might not be, as in this case.