Should I pay off my mortgage? Discussion area

phantomfreckle

I am a higher rate tax payer and have been a £150,000 interest only mortgage on a variable interest rate. I am going to increase this by £40000 to carry out some building improvements.
so my question is should I make over payments of £500per month into my pension and take the 40% tax relief on my payment or make the over payments against the mortgage

Sepa74

@Sappy, your query is probably to complex for this board - there is a specialist mortgage and endowment board that may be able to give you a better answer.

@Phantomfreckle - you need to have a plan to pay off the interest only part of your mortgage... and you also need to have a plan to fund your retirement too.

Basically, £500pcm is no where near what you need to be saving. My best suggestion is for you to talk with a financial advisor as decisions involving pensions are complex ones. If you really are only saving £500pcm, you need to do a complete money makeover too and see how you can increase that figure... like I said, it isn't nearly enough to allow you to own your own home AND retire comfortably.

dolphy

Hi, apologies if these are really stupid questions. I have looked through the forum to save any embarrassment but here goes:

1) I have inherited money from my mother's estate which will just about pay off my mortgage. Should I repay all the mortgage or is it sensible to retain a small amount should I ever need to get another mortgage, that is, I'm not sure if it is harder to get a mortgage from fresh these days. (It is possible I may have to move in the future as my child has special needs and wherever in the country he is educated, I will have to go too).

2) I assume if the mortgage is paid off then I get sent the deeds. Are these something that would be best lodged with a solicitor for safe keeping? Or again, if I kept a small amount on the mortgage then the BS would continue to keep them at no cost? Is that right?

I would be very grateful for any advice, I could ring my BS but I never feel that you get honesty and I'm just trying to make sure I don't fall into any traps as it were.

Many thanks

evo_57

Hello all. I've just taken early retirement and have taken my pension plus tax free lump sum. I'd like views on whether it would be best to pay off my mortgage immediately or invest the lump sum and use it to pay my monthly mortgage whilst still earning some interest. My lump sum was £73,000 whilst my mortgage currently stands at £33,000 and I'm on a base rate tracker running at 1.5%. Many thanks.

mellowmick

Good morning.
I had a small repayment remortgage with the Halifax for 8 years term 2 years ago. It is fixed at 5.49% for another 3 years then transfers to current rate.

I have just under 13k remaining and have just recieved a lump sum of cash which will be enough to pay off the mortgage in full. To pay this off in full early will cost me £680 in charges. I currently pay £257.20 p/m.
I am wondering which would be the best option,wether to pay it off in full or make monthly/annual overpayments? the maximum overpayment a year is 10%.

Any advice greatly appreciated.
Thanks.
Mick.

nearlytherehopefully

I have a Part Capital Repayment / Part Interest Only Offset Mortgage roughly 60/40%. My goal is to reduce the overall term of my mortgage (currently 8 years) by overpaying it. My lender informs me that the term only starts reducing once the interest only portion has been paid off - which will be about 8 years! However I have the funds available to pay off this interst only portion. Should I do so or leave it as it is and still have the lump sum in 8 years? The rate is %3.75. Thanks in anticipation of advice!

Lois_E

mellowmick wrote: »

Good morning.
I had a small repayment remortgage with the Halifax for 8 years term 2 years ago. It is fixed at 5.49% for another 3 years then transfers to current rate.

I have just under 13k remaining and have just recieved a lump sum of cash which will be enough to pay off the mortgage in full. To pay this off in full early will cost me £680 in charges. I currently pay £257.20 p/m.
I am wondering which would be the best option,wether to pay it off in full or make monthly/annual overpayments? the maximum overpayment a year is 10%.

Any advice greatly appreciated.
Thanks.
Mick.

Since nobody has the faintest idea what interest rates will be doing between 3 and 6 years for now, let's assume you'll be paying 5.49% for the whole remaining 6 years of the term. (Anyway, the online calculators don't let you put in more than one interest rate at a time). Martin's calculator says you would save £2,288 in interest by paying off immediately. If we deduct the £680 in fees, that leaves about £1,600 or thereabouts. So the next question is, how much interest could you earn on your £13k if you saved it instead? Assuming you can get about 3% and pay basic rate tax, your compound interest over 6 years should be about £2000-ish.

So it's probably better to save the money, but not very much better. If you're a higher rate taxpayer, for example, you would probably be better off paying it off now, but only very slightly.

And of course if interest rates change, the sums would all change and the answer might be very different. Sorry I can't be more help.

womble12345

I have been overpaying my mortgage by £500 a month for a while now, after each overpayment they reduced my proper monthly payment down the next month. Does this mean that my term is not reducing? Should I get them to leave my monthly payment as if instead?
Thanks

womble12345

So does that mean there has been no point to all my overpayments?

Lois_E

womble12345 wrote: »

So does that mean there has been no point to all my overpayments?

Not at all, womble. You now have a choice:

1) You can ask your lender to reduce your term. Then your term will be shorter, you will pay less interest overall, and you will be rid of your mortgage sooner. This is good.

2) You can let them keep reducing your standard monthly payment, but keep increasing your overpayment to compensate, so the total you pay each month remains the same. This will have the same effect as (1) of getting rid of your mortgage sooner and reducing your total interest, but you will have the hassle of keeping adjusting your OP. However, you will have the flexibility to pay less if you run into any difficulties at some point in the future. This is good.

3) You can decide you'd like to spend some money on something else, and enjoy the lower monthly payments being demanded on your mortgage. This is good.

Whichever way you play it, it's a winner. Well done. And if you carry on overpaying, you win even more.