Mortgage pay-off?

Jnr_81

I’m not normally one for posting on forums but would just like people’s thoughts before I go to an IFA for advice. I’m 30 yrs old in FT employment, married with a 6 month-old baby. My wife and I are 5 years into our £78k 15 year fixed rate mortgage on our first home. At the moment, having made regular overpayments (albeit only a few hundred each month) we have an outstanding balance of around £55k.

I recently conducted a review of my own, and my wifes finances and we have a total savings pot of £100k (£82k me and £18k her). I’ve always been very careful with my money, probably due to my parents educating me well on finances but I didn’t realise I had accumulated this much between various accounts.

My question - should we give serious consideration to paying off my remaining mortgage balance? With the early repayment charge it’s likely to come to £58.5k. It’s probably a ‘no-brainer’ but I would be grateful on any advice before asking an IFA.

dark^knight

Hi,

Well done in saving that amount of money, it's a great achievement.

Personally, I would leave a few pounds in there, and pay off the rest. This way you don't need to pay the repayment charge and they'll keep hold to your deeds, but you'll save all the interest.

lulabelle1

Welcome! Bearing in mind that you are posting this in a MFW forum, then I'm guessing you know the answer already....... Overpay and get rid of the mortgage (leave a few pounds like dark knight says)....!!!!

cr1mson

Depends on what interest rate you get on your savings versus what you are having to pay for your mortgage.

Could you pay a large lump sum instead to avoid early repayment charge?

Remember property is an illiquid asset.

C

dark^knight

cr1mson wrote: »

Depends on what interest rate you get on your savings versus what you are having to pay for your mortgage.

Good point.

Meadows

Jnr_81 wrote: »

My question - should we give serious consideration to paying off my remaining mortgage balance? With the early repayment charge it’s likely to come to £58.5k. It’s probably a ‘no-brainer’ but I would be grateful on any advice before asking an IFA.

We did this a few years ago when interest rates dropped and we were losing out on lots of interest per month, we said to hell with it paid off the mortgage and it is one of the best things we did, house is yours and any money you were paying on the mortgage goes back in the bank to top up the savings and it does grow really quickly (we had no penalties as we were due to renegotiate a new term at the time).

Tilly_MFW_in_6_YRS

I can only echoe the above comments, if you don't get any penalties then clear the mortgage. You can always save back the funds but you home is absolutely your own.

Good luck Tilly

Jnr_81

Savings accounts wise, I like to have things in Easy Access accounts so I'm probably earning between 2-3% in all my savings accounts. I have a fixed rate ISA paying a bit more. I would say I'm getting the best available rates in my preference of accounts.

Mortgage wise our interest rate is 5.49%.

Cr1mson - when you say a 'large lump sum', 'yes' I could do that but how could that avoid the ERC?

Meadows

As you say then 'no-brainer' interest 2 -3% mortgage 5.49% a 2.49 - 3.49% difference on your money not in your favour at the moment. Check with the bank what the early repayment fee would be you might get a pleasant surprise and when you have all the facts you can make a better decision (some banks allow you to pay a % on top of what you are paying with out incurring a penalty).

Tilly_MFW_in_6_YRS

Hiya, you will need to contact mortgage provider and check how much you can clear per year, or work out with them whether you are better paying the ERC as overall, the cost is cheaper than paying the interest on the mortgage.
Good luck Tilly

LittleMissAspie

You'll have to look at your terms and conditions. You might only be allowed to overpay a certain amount per year (usually 10% of the outstanding balance) so your lump sum couldn't be more than that. Or you might be lucky and only have an ERC for paying the whole thing off, so your lump sum could be 54k.