Should I pay off my mortgage? Discussion area

gcoops

Hello

Should I completely pay-off my mortgage?

I am debt free apart from my mortgage of £110,000. This mortgage is an off-set mortgage, outside of it's fixed rate tie-in period and is now at a variable rate of 3.27%

Earlier this year I was made redundant from my job that paid £60,000 a year. I received a post-tax lump sum of £70,000. I already had in my off-set account £40,000, so my savings now completely off-set the mortgage debt.

In addition to the off-set savings I have £15,000 in my current account.

I am now self-employed (as a limited company), so future finance is a little uncertain. My wife has a regular income of £18,000.

We also jointly own 2 buy-to-let properties. These are both on interest only mortgages (£126,000 & £100,000). From these we currently make about £10,000 a year but expect this to go down with the new taxation.

So, should I pay-off my mortgage completely? Or because I am off-setting the full amount with savings and hence paying no interest should I just keep the money in the bank, making my repayments to reduce the capital, so keeping the money there in the event I may need it - for example if my new business doesn't go so well?

It would be nice to have no mortgage and no monthly mortgage payments but it's also reassuring that I have the money for when times are tough.

All advice greatly appreciated.

G

wildenglish

Hi there,
Not sure if i am being really thick but in terms of the calculator you provide should it not have some factor for the value of the outstanding mortgage? It's all very well saying if my savings interest rate is x on £10,000 and my mortgage rate is y on £10,000 then I would be better off continuing to save.
However in reality people's savings may be in the 10s of thousands but their mortgage will probably be in the 100s of thousands, bearing in mind then the additional impact the mortgage interest rate will have on a significantly higher sum, are you not better to pay off the mortgage if your outstanding balance is significantly higher than your savings? Even potentially if the savings rate is a little higher but on a much smaller sum?
Thanks,
Scott

cheekymonkeynotts

I have a mortgage on a rented property which is making some profit each month.
The interest rate is 2.64%

I have 22 years left on the mortgage, i haven't overpaid.

Shall i use the profits each month to overpay mortgage to make it come down even quicker?

hildosaver

cheekymonkeynotts wrote: »

I have a mortgage on a rented property which is making some profit each month.
The interest rate is 2.64%

I have 22 years left on the mortgage, i haven't overpaid.

Shall i use the profits each month to overpay mortgage to make it come down even quicker?

Hello - is it an interest only mortgage or repayment?


If it's interest only then you need to think about what you plan to do with the property long-term (also be aware of the tax changes coming in the next couple of years which may eat into any profits you have). You will need to find either the total mortgage amount after 22 years or be in a position to sell the property.


If it is repayment then it's more about your own financial situation - do you have savings? Can you get a better return elsewhere?

cheekymonkeynotts

Its a repayment Hildosaver.
I haven't declared it as such to hmrc as its main residence *naughty i know*

Yes i have savings, premium bonds/ISA. No real pension hence why i decided to get the property.

I just don't like having debt & paying bank all the extra interest.

Thrugelmir

cheekymonkeynotts wrote: »

Its a repayment Hildosaver.
I haven't declared it as such to hmrc as its main residence *naughty i know*

You may not be laughing if they do catch up with you.

cheekymonkeynotts

Fingers crossed

jackie1975

I have a fixed capital and repayment morgage of 3.5% and have 11 years term still remaining. I now owe £47000 and pay £428 per month. What is the best way to save money and how much can i save? Many thanks for any advice

bob808

It's likely we shall be in a position to pay off my mortgage this month.
Would it be worth considering keeping a small balance on our mortgage instead? We may wish to move in a few years and may need to get a small mortgage. We're both nearly 50 so wonder whether we may find it tricky to get a new mortgage but easier with our current Mortgage co (Woolwich) if we keep a small balance on our current mortgage.

Lizbuff89

Please can anyone help ...I have a repayment mortgage fixed for 10yrs @ 3.89%. Each January whatever the balance is I’m allowed to pay 5% overpayment per year. I’m down now to 6 years & 1 month & £18719.34 left. I’ve been overpaying but I’m not allowed to reduce the length of the term. They reduce my monthly payment. Each month I put £100 + whatever they reduce it by into an account the each January I pay my 5%. This leaves me with some money in the account & was planning on being able to build that up so that by the time I’m say 2 years off completing my term I could take it out and pay it off early. What I want to know it am I wasting my time overpaying or should I do it anyway? I’m very confused. It wasn’t explained clearly to me as I thought I could reduce my term by paying 5% over each January cos if not then what’s the point? Please help