To Pay Off or Not?

laudo

£29k left on mortgage.

Variable rate of .9% above BoE Base rate. 3years left of payments.

However, I have £22k in an ISA, and have savings of £10k.

Question is, do I pay Mortgage off, or continue paying it as I do?

Feel good factor of being mortgage free or, continue with topping up ISA each year?

Any advice?

edinburgher

Mathematically - pay into your ISA

Emotionally - will it make you feel better?

Also consider job stability, any other debts etc.

[Deleted User]

What's the interest rate you are earning on your ISA?

Is the 10k savings in addition to the ISA? If so what's the interest rate you are earning on that?

Would any Early Repayment Charge be due on the mortgage?

The general rule of thumb is to pay off debts if the interest rate that you are paying is higher than the interest you are earning on your savings.

If the idea of being mortgage free quicker appeals to you for reasons other than financial (ie security etc) strike a balance between the two.

Personally I would pay the 10k (maybe keeping a 1k back for emergencies) towards the mortgage (unless the interest rate being earned here is very high (although this is unlikely) but keep the mortgage payment the same, so you'd still have most of your savings in a nice tax free wrapper, but you will also be mortgage free much quicker.

HTH

D9

laudo

No other debts, self employed, work steady at the moment.

No pension, hence maxing ISA each year,

laudo

Interest on ISA is 3.3%

No penalty on early repayment of mortgage.

Can you cancel Life Insurance once mortgage paid off?

edinburgher

Can you cancel Life Insurance once mortgage paid off?

Then you can easily earn more in savings than by overpaying.

Re. life insurance - check the policy and make sure that any dependants who might know of it are aware that you are doing so!

laudo

No dependants, life insurance is £25.67 per month, only in force as required for mortgage, so I guess yet another saving when mortgage free!!

edinburgher

Absolutely!

£924.12 over 3 years

laudo

edinburgher wrote: »

Absolutely!

£924.12 over 3 years

ANOTHER reason:beer:

Spiggle

Personally, provided there are no penalties to withdrawing the ISA, I'd pay it off. I know that is not the correct answer rates wise.

If you wanted a halfway house then absolutely pay the £10k off the mortgage and keep monthly payment the same.

But the security of really owning your own roof will be fantastic.

When rates eventually rise you won't have to worry and will be better off with throwing everything into savings/ISA.

I'm not sure if money in ISA counts but other savings will affect any means tested benefits should the unrehearsed happen and you cannot work for any reason.

You will save on the life insurance.

And the rate is low at the moment I know but you are still paying interest and you will be saving that amount by clearing the mortgage.

My thoughts only and not the best advice rates wise. Only you can determine how much the security of paying off will improve your feelings.

All the best,
Spigs

Sepa74

NOOOOOoooo... Your ISA is your only pension provision. It will provide tax free income once you retire. You cannot replace the money in ISAs - once it is gone, it is gone, and you can never replace that tax free income.

Your mortgage interest rate is extremely low. I don't know how old you are, but I really think you need to do a holistic review of your finances, and talk to an IFA about how to maximise your comfort in later life.

To retire securely you need property + pension + savings. At the moment you only have property and savings, no pension. If you use the ISAs to pay off the mortgage you only have property. Think very carefully - do you really want all your eggs in one basket?

Your 10K is also a handy emergency pot. You could reduce this amount slightly, but you should definitely still keep 3 months of outgoings (if your job wasn't secure I would say 6).

Make sure you are earning the maximum on these savings... you should be able to beat 1.48% interest, even allowing for the tax you will pay on the savings.

To be honest, I think you're doing great. You have built up long term tax free savings, you have an emergency pot and you have a small mortgage on a low interest rate. My main concern is the lack of pension. Leave things be, if you want to be MF quicker, use this site to help you reduce your expenditure and maximise your income and pay any savings / increased income into the mortgage. It will make a slow but steady difference to your MF date.

Definitely think about your pension, which is the missing 'leg' of your long term financial security.

In your case, the security of being MF now would be illusory.

Sorry to be so blunt!