Offset mortgage - repay or not?

ericonabike

A year or so ago I remortgaged my house for £80k over six years to buy another property. The mortgage deal was excellent - an offset at 2.39% over base so now 2.89%. I keep my savings in the 'offsetting' account so that they effectively earn 2.89% net.

I am now in a position where I can, if I wish, repay the mortgage and would have around £10k over. This would mean that I receive the £250 a month rent from the property [relative's rates] in full, which would then be available to invest [although I'm struggling to find any savings account that would give 2.89 net without locking it away for years].

Is there a better alternative to paying down the mortgage? I have a shares ISA that I invest in myself, and am reluctant to put money into any vehicle that would involve paying commission.

getmore4less

Your logic is wrong.

Most offsets pay nothing on surplus funds(check yours)

If you are 100% offset you have the £250 to invest now.

ericonabike

Well, perhaps not wrong, but badly explained. I have only just reached the position where I can pay off the mortgage, 'thanks' to redundancy and early retirement. I know that savings in excess of the mortgage will not earn interest. Question was whether or not there is a better alternative to using the £80k to pay off the mortgage?

getmore4less

The choice is to leave the money 100% offset untill there is a better option.

There might not be one today but tomorow there might be and if you pay it off you can't go back.

You stil need to dcide what to do with the surplus and the rental income

remember you can still claim tax relief on the interest if you withdraw the funds so that may swing an investment

ericonabike

Good point. Something may turn up that offers more than the mortgage rate so will meanwhile leave the £80k in the offset a/c to neutralise the interest and look for a home for the balance.