Pay off chunk of mortgage or not?

gerri2011

Hi all...an endowment of mine has matured and I am undecided whether to pay off a chunk of the interest only mortgage I have, or put the money into a savings account. Mortgage term has another eight years.

Thrugelmir

What mortgage product do you currently have. Early repayment charges? Interest rate?

gerri2011

Thrugelmir wrote: »

What mortgage product do you currently have. Early repayment charges? Interest rate?

Hi, currently on interest only which is 4.2% standard variable rate. No early repayment charges.

dimbo61

You set up the endowment to pay off some or all of the mortgage in 25/30 years time.
If you put it into a savings account you wont earn 4.2% After tax!
If you have over £16K in savings and lose your job guess what the nice benefits people will expect you to live off your savings.
So when you get the cheque pay it ALL off the mortgage, Ask the mortgage people to keep your mortgage payment static.
If you do that you will reduce the rest of the IO mortgage down alot over the next 8 years.
Or you could blow it all on a new car/nice holiday and live in poverty in your old age

gerri2011

dimbo61 wrote: »

You set up the endowment to pay off some or all of the mortgage in 25/30 years time.
If you put it into a savings account you wont earn 4.2% After tax!
If you have over £16K in savings and lose your job guess what the nice benefits people will expect you to live off your savings.
So when you get the cheque pay it ALL off the mortgage, Ask the mortgage people to keep your mortgage payment static.
If you do that you will reduce the rest of the IO mortgage down alot over the next 8 years.
Or you could blow it all on a new car/nice holiday and live in poverty in your old age

Nice, thanks dimbo61 :T, that's just what I have done! It's brought the mortgage balance down considerably and also monthly repayments too!! :rotfl:

AFK_Matrix

Urrr but dimbo61 said to keep your monthly payments the same so you are actually paying off the mortgage. Instead you may now be paying a lower monthly amount but your still only paying the interest off.

I would up the monthly payment up again so you are actually paying off the mortgage.