Paying a lump sum off my mortgage!!

pauliepie

Just wanted to know what would happen if......

I have a mortgage at the moment of £75k, with 17 years left to run.
£30k Interest only.
£45k Repayment.

What would happen if I wanted to pay off £60k cash from my savings I have or do you advise otherwise,

kenshaz

No pay it off ,you will save thousands on interest.Some will argue that you could get interest on savings equivalent to your interest payments ,but they fluctuate ,safe bet pay and save ,all that compound interest saved.

yanchuga

You should find an expert for this question.

kenshaz

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UK007BullDog

Paying it all off is good, however the lenders will only entertain that idea if the mortgage amount is at least £25,001 if it less than that you might have an issue if you remortgage with a new lender. In your case an offset mortgage would be an idea. Do a search on those. Intelligent Finance does them but you have to have an excellent credit record. That way you can offset your mortgage against the loans and in the future you can overpay as well and reduce the term of the mortgage much quicker saving you a lot of interest in the mean time. So should you ever require this money for something else you can pull it back out. There are fees involved but they are minimal to the gains you will achieve.

silvercar

Check there are no redemption penalties if you pay off a lump sum. Some lenders allow 5% or even 10% a year without penalty.

Antj29

in all honesty, if you have 60k to pay off, with out knowing your overall financial situation its hard to say.

Off the cuff advice goes two ways,

either remortgage or convert to an offset mortgage and then offset the 60k against your 75k mortgage, that way you still have access to the 60k, remember once paid off it may not be so straight forward to get the money back if you needed it quickly.

or

Pay it off assuming no penalties ( interest only element in full and then the remainder on repayment) , keep you payments the same as present and pay the remainder 15k off over the next 2 yrs. mortgage free

chun831

UK007BullDog wrote:

In your case an offset mortgage would be an idea. Do a search on those. Intelligent Finance does them but you have to have an excellent credit record. That way you can offset your mortgage against the loans and in the future you can overpay as well and reduce the term of the mortgage much quicker saving you a lot of interest in the mean time. So should you ever require this money for something else you can pull it back out. There are fees involved but they are minimal to the gains you will achieve.

I agree fully with this!
Whilst I accept that there is a lot of bad publicity about ref First Direct. We have just set up an offset mortgage with them. Excellent serivce, no errors, 3 accounts offset at the moment and all appears well.
Check the rates but offset against lending normally earns you more interest than savings and no tax to pay. Result is £100,000 mortgage with £20,000 or so in a savings account offset, we only pay interest on £80,000 and at any time transfer it accross to reduce the capital. This then allows you to use that saved money if and when you need it - complete flexibility.
'One Account' do the same but the rate was rubbish - 5.8%.