Should I pay off my mortgage? Discussion area

INSPIRED

pjcox2005 wrote: »

Hi, obviously tax to take into account but as two possible options

1) a number of bank accounts are now offering up to 5% on balances http://www.moneysavingexpert.com/banking/compare-best-bank-accounts

2) You could look at peer to peer lenders like ratesetters for a rate around 5%. Slightly more risk but probably still considered pretty low risk.

Hope that helps

Many thanks.

We have all the interest paying bank accounts so maybe we need to look at P2P. I have always thought that we are not in any position to take risks and have avoided anything without some measure of certainty.

INSPIRED

jamesd wrote: »

You only need net 1.75% to beat the 3.75% - 2% that you'd pay on the mortgage and that is easy to get now even with risk-free current and savings accounts. Then you could pay the remainder next year without the 2% penalty. But it's be crazy to do this given the next part...
This is very puzzling. If you're almost at retirement age you're presumably soon going to be 55 or have already passed that age. This means that from 55 you have immediate access to a 25% tax free lump sum from all personal pension pots and can put money into a pension pot then quickly take it out the 25% lump sum. From 6 April 2016 you can also take out as much of the rest of the pot as you like, added to your normal taxable income. Which means that you can get a quick tax gain by putting money into a pension before using it for any mortgage repaying. You don't even need to invest it anywhere to get this gain, you can leave it sitting on deposit if you want to. Given your apparent age, routing money via a pension is almost unbeatable as a way to go to increase the amount paid of for each Pound of your money spent.

So the most urgent need that comes to mind is to find out about your current pensions and see what those can do to help you to achieve your objectives, adding more money from income or non-pension savings to pension pots along the way to maximise your tax gains.

Thank you, this has given us much food for thought.

I have no pension due to long term disability. OH has a Forces Pension so there is nothing we can do there but there is a small private pension from employment post military service and it has done rather well - apart from the last 12 months where we have seen reduced growth on shares and share Isas.

Obviously, we need to think long and hard. Once again, thank you for your help.

Phoenix1988

Hello,


I will be coming into alump sum of money int he new year (£15,000) and we are considering putting it all into overpaying our mortgage. We bought our first house last year with a 40 year mortgage term on the basis that we are young and both on the first rung of our career ladders - our salaries will increase over time and so we can pay off s a few years, or hopefully move into a different house with a shorter mortgage term.


So, my question is, should I use this lump sum to overpay my mortgage (using the overpayment calculator I could pay off approx. 9 years) and (stupid question coming up) when we sell the house we will have more capital to put on the next property?


Thanks in advance for any help

Nellyw

Hi all, I have 8k overpayment in my repayment mortgage with Nationwide. I also have some money in my ISA invested in the Woodford fund. This has increased by 11% since the fund launch last year

As my mortgage rate is 2.34% I'm thinking of taking the 8k overpayment out and also investing that in the ISA fund.

I have approx 13 years left on the mortgage.

I spoke to NW who said that the mortgage payment would increase by £55 a month or £660 a year. I understand it would include the interest and part repayment but that still seems a big increase and was wondering if it was still worth it?

Thx for any advice.

northerner999

Phoenix1988 wrote: »

Hello,


I will be coming into alump sum of money int he new year (£15,000) and we are considering putting it all into overpaying our mortgage. We bought our first house last year with a 40 year mortgage term on the basis that we are young and both on the first rung of our career ladders - our salaries will increase over time and so we can pay off s a few years, or hopefully move into a different house with a shorter mortgage term.


So, my question is, should I use this lump sum to overpay my mortgage (using the overpayment calculator I could pay off approx. 9 years) and (stupid question coming up) when we sell the house we will have more capital to put on the next property?


Thanks in advance for any help

You will have more equity in your current property, which will increase your options if/when you look to move.

If I was you I'd make any overpayment (while being careful not to go over any overpayment limit) without seeking to reduce the term, this will lower your minimum payment and give you more financial options. You may find you need to save up to improve your current property before selling it, or find a property you want to buy but need cash in hand to cover costs such as moving, renovating etc.

Riskadverse

Hello,

I have been overpaying my mortgage for the last 10 years and I am now due to finish paying it of this year, 4 years ahead of schedule. The reason it wasn't paid of earlier was that I borrowed back some of the overpayment for house improvements about 5 years ago. Recently I have borrowed back some more money and put it in to a current account paying 5%. This means that the money I'm earning in interest from the current account is more that the interest I'm am paying on my outstanding mortgage.

My plan was to keep the 5% current account and continue to overpay my mortgage until it got to level of when I can close the current account and in doing so pay off the mortgage.

I was wondering now if I should keep the mortgage going to the end of it's term in 4 fours time, and just use the interest from the current account to pay the monthly interest on my Interest Only mortgage. I can then use the money I was putting to playing off the capital into a Cash ISA to build up my savings?

Any thoughts would be welcome.

Ma77hew

Are you taking into account tax? for example I would have to get 6.3% interest rate on savings to beat overpaying the mortgage.

There is a calculator about half way down the page here:

Cash ISA's I believe have quite low interest rate 1-2%, is that higher than you mortgage interest rate?

Riskadverse

The interest on the current account is tax free and I'm also offsetting my mortgage against my current account which is reducing the interest paid. The mortgage interest rate is 3.8%.

I am thinking that if I pay off the mortgage the I will have lost access to my overpayments in the event something goes wrong and I need access to a lump sum. I currently only have enough savings to keep me going for about a month. Therefore I was thinking it might be better to redirect my capital overpayments to a saving account to build up my savings to a level that could keep me going for say 3-6 months.

Gloomendoom

I have been in a position to pay off my mortgage for some time but haven't for pretty much the reasons you outline. Even taking into account tax, the savings are earning comfortably more than the mortgage is costing me while providing a reassuring buffer in case of emergencies.

Cupcakesjo

Hi, can anyone help, we have an interest only mortgage and I want to know if I can make over payments and is it worth doing, we have £172k and 15 yrs left to pay. Thanks