Help with mortgage dilemma

cydney65

Hi, here's our situation; My other-half and I have a mortgage with the Nationwide which stands at £78000. It comes up for renewal in October this year. We are lucky enough to have savings of £30000(life savings). Would it be wise to put that amount towards the mortgage on renewal so that the mortgage term is reduced to 7yrs from 18yrs-it is currently earning £1000 interest p.a., or should we keep these savings and over pay on the mortgage each month to get the term down to 14 yrs.
The term is important as my partner is 61 and would like to be around to enjoy some mortgage free years! Seems like a no-brainer typing this out, but £30000 is a lot of money to pay out.
Thoughts...

CloudCuckooLand

I wouldn't put all 'life savings' in the mortgage...get your Cash ISAs for pre- and post- April 6th sorted out...permanent emergency funds. Between 3 and 6 months of income, is recommended for emergencies...may be more or less than the ISAs would hold.

After that, maybe what's left plus overpaying would achieve what you are aiming for?

Assuming you have no other more expensive debts left.

originalmiscellany

Well couldn't you...
get an offset mortgage? And as a low interest rate and complete overpayment freedom (check the small print) you can overpay as much as you want, but if there's a problem you have access to it.

Could be a win-win?

originalmiscellany

And you could apply for an offset for 6 months in advance, which would take you to October, which will allow you to get a good deal now.

cydney65

Thank you both, you have given us some options to think about. :beer:

dimbo61

What does the mortgage revert to at the end of the fix? BMR of 2.5% or SVR of 3.99%
Now if your OH is already 61 you may struggle to get a mortgage with other lenders so yes keep 3/6 months of income in cash ISA,s earning hopefully 3% + and pay the rest off the mortgage.
See what your existing lender can offer you and try to overpay the mortgage every month
Nationwide allow £500 a month.
After you have paid the lump sum off the mortgage balance see how much it would cost each month to reduce the term down to 9 years ( OH then 70) unless you have endowments to clear the mortgage

cydney65

Thank you dimbo, we were starting to think along those lines. I think we need to chat with Nationwide and see what we can do (the tracker we are on reverts to SVR btw). We both know that the money we have needs to work for us but we now realise that it's not an all or nothing approach, so thank you all for giving us other options.

getmore4less

I think a significant factor here is income, going forward that 18year term may actualy be a usefull thing to keep.

I would definately look at the bigger picture of what expences may come up over the next 20years, that will need capital(you have) or saving from income.

dimbo61

AAAAAAAAHHH!
Now your current tracker reverts to the Nationwide SVR AT 3.99% OR BMR at 2.5% BIG DIFFERENCE
As you still have an 18 year term Nationwide cant take that off you if you pay the mortgage every month but this will take your OH upto 80 when the mortgage is paid.
In 6 months your tracker is over and if you go onto the BMR at 2.5% you would be better off putting money into savings ( Cash ISA,s and regular savers )
You have more flexability if you leave the term at 18 years and can overpay as much as you want on the BMR?SVR with no ERC,s
You should be able to get 3% plus from your savings in cash ISA,s Barclays,Abbey and AA