quickest way to pay off mortgage
cassidy20
Posts: 2 Newbie
I have 11 years left to pay off my mortgage roughly 75,000, however I have savings of 25,000, would I be better off paying this as a lump sum (not worried about not accessing savings). Take out one of the accounts that takes into accounts savings against mortgage debt ie one account, or Reducing the term of my mortgage and paying a higher monthly payments. What would be the cheapest option in the long run.
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Comments
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Check out Skipton Building Society interactive mortgage calculator. See the effect of paying off lump sums and the interest you will save. Also are your savings earning more interest than you are paying on your mortgage? Doubt it. Maybe save a certain amount (for a rainy day) and pay a chunk of your mortgage.
Overpayments howere small add up and make a huge difference.
Good luck
TheWoot0 -
I like the offsets, and some (Barclays and IF) will allow your offset your ISA's againist your mortgage as well. If you've got 75k to pay off, you may be best finding a mortgage with a very low rate that has no penalties for overpayment. You can normally "borrow back" any overpayment.
Hope this helps.0 -
The cheapest option in the long run is currently an interest only mortgage paying the difference between interest only and repayment into cash ISAs paying more interest than the mortgage costs. If your savings are already in cash ISAs you might need to move them to a cash ISA paying the best rate. Add any extra payments you want to make to the cash ISA accounts.
The mortgages that allow you to offset with cash ISA money are handy because you can offset when mortgage rates are higher than ISA rates and switch the money to a different ISA if one offers a higher interest rate than the mortgage.
When looking at savings in mortgage interest by overpaying, don't forget to also work out the lost interest on savings. If you only look at the mortgage side it looks great to overpay, until you check the savings and realise you're actually worse off by overpaying if the ISA rates are higher than the mortgage rate.
If you get a mortgage with a very high interest rate - the One Account is the classic example - then you would be better off paying off the mortgage instead. Fortunately you don't need to get a mortgage with such a terrible interest rate.
Reducing the mortgage term decreases your flexibility so it's not really a good idea. A mortage lasts for a long time and it's good to be able to overpay less at times of high expense, something you limit if you set a very short term.
There are potentially cheaper options using stocks and shares investing. That's more variable than the savings rates, though, so many won't like the idea. If you do it's fine, or you might want to use it for only money above the limits in the cash ISAs, so the cash part provides a great deal of certainty.0 -
Hi
Why not shorten the mortgage term and pay back in maybe 6 years and keep the £25K safe in savings and investments etc only using that money for emergencies.0
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