Pay off Mortgage?? No - save at a higher rate instead

DB0511

Sorry if this has been discussed before as it probably has.

I have read so many articles, forum responses etc. recently saying that people should pay off more of their mortgage at present while rates are low.

Not me I'm afraid! I'm lucky that my offset mortgage is a cracker at 0.5% above the base rate so at 1% its a very cheap loan at present. I had £16,000 savings in the mortgage offset account up until last year but realised I'd do better if I took it out and stuck it into a savings account earning 3.5% rather then leaving it where it was, as it was only helping me to pay 1% interest on £16,000 less of my outstanding mortgage sum.

Until the base rate rises significantly I'm putting all spare money into a savings vehicle and only paying the minimum amount off the mortgage each month. When rates rise I'll cancel the savings accounts and stick it all back into the offset account.

Anyone else done this or am I paddling this ship alone??

kingster2069

Hi, I don't think your alone. I think the aim is to pay off your mortgage as quickly as possible. Maximising your income is always recommended and in these unusual financial times saving can out perform paying down your mortgage.
I would say you are doing the right thing, just make sure that if your not using you ISA allowance then saving in this way can help you avoid tax.

ashaput

Other person may consider this as the best way in making financial plan. But personally I will say that paying off the mortgage as soon as possible is the best option. If you think this one works so well to you, then keep it going

black_taxi_2

i understand where your coming from DB----but say you hit 60k savings---will be mentaly strong to USE SAVINGS to clear mortgage.could be a mental block barrier from doing it.

since i started MFW i found it alot easier having one target and getting stuck into it.

originalmiscellany

I would have to agree with black taxi - I find it works for me to have a single target - to get the mortgage down and to focus on only that task, rather than having pots of cash here and there... I know that it's more money efficient to have savings pots, but I know in the next 12 months we will be MF then we can start to save with equal zeal