Should I spend all my savings on paying my house off?

YorkshireBoy

When I found myself in your position 5 years ago I switched product (same lender) to an offset mortgage.

As I'm 100% offset, no monthly payment is required. The benefit to me is a very large overdraft facility I can draw on should an emergency arise. The cost of this borrowing would be my mortgage rate, which is BOE + 0.75% for life (currently 3.75% due to the collar applying).

It works for me.

lisyloo

Mathematically it's a case of comparing savings rate (net of tax if appropriate) with mortgage rate, however as already noted there are a number of other issues.

1) cashflow (for me this means enough to pay for a holiday)
2) Contingency in case of an emergency (boiler, roof, car crash) or change in circs (redundancy, sickness)
3) Pension - are you funding it enough
4) spread of assets - are you diversified between cash, equities, property?
5) tax avoidance - pensions, isas, NSI, offsets all avoid tax

I'd say you need to do a full scale review.

Primrose

Are you still working? Is your job secure or is there a possibility that you could be made redundant? if so, I'd be wary of paying off your mortgage completely and leaving yourselves with no emergency savings to live on. Also, if your mortgage rate is lower than the interest rate you can earn on savings after tax, there's little point in reducing your debt. You need to look at how long your working life (and earned income) is likely to continue before making a decision, as well as whether your occupational pension is likely to be adequate.

ed123_2

......I don,t know why people start these threads then do not provide the information others request in order to provide the answer to their opening post.......ed

atush

I agree Ed.

We should all hold of on advice (much of it repeated) until the OP cna be bothered to come back.


It's not that we mind taking the time to respond. But we mind checking back and they haven't bothered to look lol ;-)

nigelhv

YorkshireBoy wrote: »

When I found myself in your position 5 years ago I switched product (same lender) to an offset mortgage.

As I'm 100% offset, no monthly payment is required. The benefit to me is a very large overdraft facility I can draw on should an emergency arise. The cost of this borrowing would be my mortgage rate, which is BOE + 0.75% for life (currently 3.75% due to the collar applying).

It works for me.

By 100% offset, do you mean that you have a positive balance in the offset current account that's equal to the outstanding mortgage?

hallmark

DDBA wrote: »

Ok so me and the wife only owe about 25k on our house and we could afford to pay the whole thing off in one go. However this would almost totally wipe out our savings. The thing is, our mortgage payments are very low as they are and hardly put an dent in our combined monthly income. I know paying the house off outright now would work out a lot cheaper in the long run, but I don't fancy the idea of just blowing all our savings on it in one go. As I say, our monthly morgage payments are so low that they don't eat into our quality of life one little bit.

What would you do?

If you're talking about amounts that low you may as well just pay it off. If you had say a £200k mortgage & £200k of savings it's more of a tricky decision. But if your current mortgage hardly makes a dent in dual income just pay it & set about rebuilding your savings, presumably it won't take long to build them back up to 25k.

YorkshireBoy

nigelhv wrote: »

By 100% offset, do you mean that you have a positive balance in the offset current account that's equal to the outstanding mortgage?

Yes.......