Should I pay off my mortgage now and live with no savings in the bank ?

frosty

HI macce,

why not pay off £25,000,then you will still have some savings,then save up and pay another lump in a couple of years.

medic1978

Keep hold of the 28K in ISA

Pay off 7K from other savings and then make overpayments per month- once your ISA is maxed for each tax year

calleyw

I would also say no.

I am in the same position although the figures differ and I have slightly higher mortgage.

I could pay my mortgage off in one go but would leave me with little or no savings. But and this is the kicker for me. I worked out to replace all that money with just the mortgage payments alone which are £230 a month would take me nearly 17 years. I would not have much extra to save as I have a low income.

You are right you never know what is around the corner. All I can say is that I am lucky my husband almost died last September from a stroke. He is home and getting better day by day. And money can't replace him. But it is there if I need a buffer zone. As he now only has benefits as income.

Also we are thinking that we may move in the next few years as well.

All the best what ever you choose to do.

Yours


Calley

save-a-lot

medic1978 wrote: »

Keep hold of the 28K in ISA

Pay off 7K from other savings and then make overpayments per month- once your ISA is maxed for each tax year

I 100% agree with medic1978, simply because of the tax free earnings on the sum in the ISA that will keep rewarding you long after the mortgage is cleared - remember, once the money is taken from the ISA it cannot be returned. So, I would pay off the lump sum using the money in the ICICI account and then max out an ISA every year as quickly as possible and then switch to overpaying as much as you can monthly.

MRSMCAWBER

I was so interested to read this question....
my hubby and i will face the same thing - not for 5 years mind...we have only had our mortgage a couple of years and the house it let out at the moment as my hubby is in the forces and we are moving to germany in the middle of august yippee-extra allowance for being abroad...and when you shop everything is sooo much cheaper...no tax :-)..extra pennies....as a newbie money saver its very exciting.
when he finally finishes his 27 years his pension lump sum is enough to pay off our mortgage if we choose...which is what i want to do...hubby likes the idea of buying something bigger....but im determined to dig my heels in...after all as i see it he will be in his late 40s...and is due his full pension at 55 and could then give up work if he chose...not that he will but at least he can go for job satisfaction instead of just working to pay the mortgage...
sooo thankyou for all the ideas, opinions and information i keep finding from you experienced money savers :-)

emmalt

Here's Martin's view.

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1155574996,4636

I think you should. If your roof falls off you can get a loan or use a credit card to pay for the repairs. Also by then you might have saved some money.

Also, insurances for if you are ill or loose your job aren't always that good. You must read the small print. I.e. if you are made redundant and get three months pay the insurance won't kick in for three months, etc.

If you want to travel around the world you could rent your house for some income.

nickj_2

i am in a similar situation , and having the same thoughts , my mortgage is 37k , i've still got another 13 years to go when it will be paid off by an endowment , this is currently projected to be short by 10k , if i cash it in now i can get around 15k for it and with isa 's and savings have enough to pay thefull amount ,
my reasoning is that my mortgage and endowmwnt repayments are 260 pm , over the 13 years i can save that cash for me to use rather than paying the bank .

andrewmoorcroft

emmalt wrote: »

Here's Martin's view.

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1155574996,4636

I think you should.

I dont agree. I agree with Martins View - I.e. don't pay off your mortgage.
Martins view from the above link - "The Interest Free/Very Cheap Debt Exception. This whole concept is based on the fact that debts cost more than savings earn. Yet those who carefully and conscientiously manage their debts so they're constantly interest free should follow the opposite logic.
If the interest rate on your debt is less than the amount your savings earn after tax then, providing you're financially disciplined, you can profit from building up savings and keep the debts. In effect you're being paid on money lent to you by the banks for nothing."

I think that you should get the best mortgage rate and invest your excess cash at a higher rate than the mortgage - thus you make the difference. Best mortgages 5%, best ISA's 6% (1% profit). Even if you can't afford the additional investment you should have a interest only mortgage instead of a repayment. They are the same but with an interest only you can control the repayment. An interest only mortgage is cheaper by the cost of the repayment part. Instead of paying the repayment part to save incurring the 5% interest charged, use it to invest at 6%. It requires some effort though. It relies on you chasing the lowest mortgage rate and moving your ISA's each year to the highest rate which you should be doing anyway. If you want the lazy route then get a repayment mortgage and make overpayments but you'll be worse off!
My posts on this thread explain - http://forums.moneysavingexpert.com/showthread.html?t=443343
Good luck

burnoutbabe

i said no

18 months time i will be debt free - ie same amount in mortage as savings (so about 50k for each)

but my mortgage rate is 5.5% and my isa#s earn more than that. my prem bonds are a fun investment and my shares and unit trusts are also long term savings plans which should earn more.

if i have excess cash than a 12% reg saver is about the best risk free investment to make and then it can go against the mortgage (as cash isa now full, as is equity isa)

i could just chuck all cash at mortgae and be mortgage free, but its better for me to have the other investments and keep the mortgage.

Hurdler

Macce - I have similar mortgage amounts to you but not quite as advanced with the ISA and Savings (although did inherit a load of shares recently but reluctant to cash those in - for all the rainy day reasons above!).

I've opted to split my monthly excess between overpayment and savings (earning a couple of percent less) with a maxed out ISA as well to boot. Snowball effect for me - overpayment = reduction in monthly payment = more saved the following month = more of an overpayment and so on. Long slog but it will be worth it in the end, and I have rainy day capability to boot.