Should I pay off my Mortgage?

Moby

My partner and I are just about in a position to pay off the balance of our outstanding mortgage (around £37K standard 5.5% rate) if we cashed in our endowments early and added some cash from an ISA. Should we do this on the basis that we'll get rid of the debt and remaining future interest while losing out on the final bonuses at the end of the plans or wait until the endowments mature (in 2012, 2017 and 2020) respectively?

ryan86uk

I would pay it off and get rid of it.

dimbo61

We have no idea of final bonsus which might be paid if you wait for the endowments to finish.
Losing ISA,s and the tax free income they earn cant be made up!
once you have paid the mortgage off will you have TOO much money to invest tax free

Moby

Dimbo
Are you saying that its better to continue paying off the mortgage gradually and keeping up with the monthly endowment payments?

lookingforideas

Had a similar problem a few years ago when my morgage deal at the time was due to expire and since I had to see a mortgage advisor before they would let me change to a new deal I went away and then started to think more closely about whether to use all my cash ISA savings at the time to clear the morgage - in the end I did that instead of re-morgaging.

Coinsidering the information that you have given I can't think of a risk free way of generating a 5.5% after tax return so if you are not going to go for an new morgage deal that would cut that rate then there is a good arguement to clear the morgage. Reasonably sure no cash ISA is currently paying anywhere that at the moment.

Neve had an endowment and also not clear whether the endownments are with profits or units. If with profits my understanding is that the terminal bonus is significant and won't necessarily be incorporated into the surrender figure. On that basis and considering 2012 isn't that far away keeping that policy running may be sensible as may return more than 5.5% on the basis of a terminal bonus. The policies furthur away are a more difficult call as to whether they would return more than 5.5%.

If the endowments are unit linked didn't think there is any difference and the question then is whether you think the funds will grow by more than the 5.5% you're paying on the morgage. Leaving it until 2012 also means that might be able to avoid using the ISA funds.

Losing the ISA wrapper is more of a concern with regards to cash ISA's but also need to consider whether you are fully utilising the allowances. If yes then may want to consider the impact of using some of these savings as can't put the money back in. However as you and your partner can each put in £10,200 into ISA's (half cash, half shares) then diverting those savings for two years into the morgage would clear it in less than two years which is another option. If you're not currently or in the near future likely to fully utilise all of your ISA allowances then can rebuild them so less of an issue.

My major concern when I cleared the morgage was that I used all of my savings, the majority of which were in cash ISA's and whilst I was able to rebuild them, it took time. Against that savings rates collapsed so the lose of the tax free ISA interest wasn't a sigificant issue. I haven't regretted the decision and to be honest it is a challenge to fully utilise the full £10,200 ISA limit.

The issues that you need to consider are:

1. Risk - do you want the certainty of the savings from paying off the morgage - about £2K per annum or prefer the potential returns from the ISA/endowments which need to earn more than 5.5%.

2. What will you do with the extra money from not having to pay for mortgage/endowments and if it will go into savings can you put it into ISA's and if not, is that a concern.

3. Life insurance - do you need to replace the endowments provision.

4. Do you prefer to have savings/endowments or no mortgage - can always leave a nominal sum on the mortgage in case you need to borrow again.

Don't think there is an easy answer - I would probably prefer the low risk option of clearing the morgage but would be inclided to keep the 2012 endowment going, especially if it is a with profits due to the terminal bonus.

A third option is to surrender the two later endowments and use this to reduce the mortgage and then use the savings in interest and endowments payments to convert the mortgage into part repayment/part interest or just pay off what you want each month. Would mean that you avoid utilising the ISA and don't lose out on the 2012 terminal bonus.

wymondham

With rates about to go up and uncertainty on the job front, if you have other monies stashed away for a rainy day I would serious consider getting rid of the mortgage. It is a big weight lifted from you and may open up more opportunities for you in the future, specifically on the lifestyle front.

lady1964

Hi All,
I have a question to ask on the subject of paying off mortgages.

We have an offset mortgage, we've been overpaying by almost 1k per month and we currently owe a shade under 50k. We have two endowments which have about 7 years left to run and our payments for those are about £200 per month, making our total mortgage & endowments payments around £1,200 per month.

We are now in the very fortunate position of having more savings than we owe on our mortgage so had been thinking we need to speak to an IFA to decide what to do. However, circumstances have changed dramatically very recently in that along with me being made redundant later this year, my hubby also has to look for a new job now.

We've obviously looked at all of our outgoings and realised that we have to look at where we can make savings on our outgoings and have found out that our endowments, if surrendered, will give us about 3k short of what we owe on our mortgage, so we could top that up and pay it off, therefore releasing the £1,200 burden each month and owning our house outright, making it easier (hopefully) should we need to sell and buy something smaller as a cash buyer.

I'm looking for advice on whether this is the best thing to do, we did think about surrendering one policy and paying about 20k off the mortgage and reducing down what we pay on the mortgage each month and would only have one endowment to pay for each month, but we're just not sure, or is there something else we could consider before paying off the mortgage? We don't want to wipe out our savings as we may have to use them for day to day living until hubby gets another job, particularly if I don't get a new job either.
Any advice/suggestions warmly welcomed, thanks