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

save-a-lot

Hurdler wrote: »

(although did inherit a load of shares recently but reluctant to cash those in - for all the rainy day reasons above!).

Hi

Just a thought, if the inherited shares work out to be a significant sum held only in one company then why not consider selling them and buying shares in a diverse range of companies to spread the risk. I hold a large sum of shares in the company I work for and it was only recently that I realised that holding onto them was not the best move as the share price has lost a few quid recently. If I had sold and diversified I would have been in a better position now.

[Deleted User]

I agree with save-a-lot protect your ISA but if you have any savings that are taxed then wack them on your mortgage. The only reason not to wack it on your mortgage is if the saving rate after taking in to account your tax boundary is more then your mortgage rate, if it is not and at your mortgage rate id say its probably not then pay it off .

Also move your isa to kent relliance they pay 6% .

Hurdler

save-a-lot wrote: »

Just a thought, if the inherited shares work out to be a significant sum held only in one company then why not consider selling them and buying shares in a diverse range of companies to spread the risk.

Hi Save-a-lot
They were pretty wide spread already - my dad invested in a lot of public issues (for both him and me, incidentally but my own portfolio was quite small compared to his) - I will go back and have a look though because he used to subscribe to dividend reinvestment plans and so got more shares instead of dividends. I opted the other way - and apparantly DRIPs die with the shareholder...
But your suggestion does get me thinking... I want to eventually let out my flat once i whittle away a huge shortfall between planned new mortgage and potential equity... if I get the gearing right in terms of profit earned from the flat I'll look at that kind of investment plan as the BTL mortgage will be interest. I know my ex recommend Hargreaves-Landsown for portfolio management... Ta muchly!

Macce

Thanks for all the advice. I have decided to hold off paying off the mortgage this year. I have held onto my ISA savings and decided to throw all the money in my instant access savings account (£7K) towards the mortgage as some have suggested.

Depending on the interest rates this time next year I may bite the bullet and pay it off then. Till then I'm counting down the days !

save-a-lot

Hi Macce

You are in an enviable position to be in, I think you have made a good call doing what you are doing... I suppose wieghing the situation up over time is really the best thing you can do really. At the end of the day you have the knowledge that you can just pay it off, so that must feel good and make you feel less vulnerable to rate rises.

andrewmoorcroft

Macce wrote: »

Thanks for all the advice. I have decided to hold off paying off the mortgage this year. I have held onto my ISA savings and decided to throw all the money in my instant access savings account (£7K) towards the mortgage as some have suggested.

Depending on the interest rates this time next year I may bite the bullet and pay it off then. Till then I'm counting down the days !

Well done, i think uve made the right decision. The majority of MFW's on this site should join moneywastingexpert.com. Most mortgage owners are in a position where they'd be better off by getting the best mortgage rate and saving there excess money at a higher rate. This is the moneysaving solution but many have an unhealthy obsession of paying there mortgage off as ASAP despite wasting money. It appears that the failure of endowments has created irational thinking group that dont realise that an interest only mortgage with investment is still the cheapest and can be just as safe as a repayment mortgage (if using cash ISA's).

A few years ago when my wife did not work, we took out a further £100K 2% fixed mortgage with the coventry that we didn't even need. There were no strings, redemption hang overs etc and wify invested it at 6% tax free. We made £4K each year!

My advice - never make capital repayments unless u've used up your ISA limit. Never make overpayments if you or your partner is a non-taxpayer. If you are not better off by doing the above then uve either got a crap mortgage rate or ur not looking hard enough for ur investment or you cant be bothered to save money.

Hobo_2

Good decision OP,agree with andrews points done the same thing for a few years now.

Also borrowing as much as you can on interest only & fully offset with savings

can make the best of a bad situation for your Family/dependants "Death"

mortgage will be payed off by life policy covering the full amount owed cos interest only

None of us Know whats around the corner, but that base is covered!

hostertlady

andrewmoorcroft wrote: »

Well done, i think uve made the right decision. The majority of MFW's on this site should join moneywastingexpert.com. Most mortgage owners are in a position where they'd be better off by getting the best mortgage rate and saving there excess money at a higher rate. This is the moneysaving solution but many have an unhealthy obsession of paying there mortgage off as ASAP despite wasting money. It appears that the failure of endowments has created irational thinking group that dont realise that an interest only mortgage with investment is still the cheapest and can be just as safe as a repayment mortgage (if using cash ISA's).
*****
A few years ago when my wife did not work, we took out a further £100K 2% fixed mortgage with the coventry that we didn't even need. There were no strings, redemption hang overs etc and wify invested it at 6% tax free. We made £4K each year!

My advice - never make capital repayments unless u've used up your ISA limit. Never make overpayments if you or your partner is a non-taxpayer. If you are not better off by doing the above then uve either got a crap mortgage rate or ur not looking hard enough for ur investment or you cant be bothered to save money.

*****
what a good idea..... i dont pay tax so would you do it now or are the interest rates too high now??
gosh i wish i was more savvy on this sort of thing!!!!!!!!! I'm sure me and hubby could do so much more with our savings etc. my mortgage finishes next year and we have overpaid on purpose so our endownment will basically be ours to do as we wish But i know i could do more with our money at the moment.........

Dithering_Dad

andrewmoorcroft wrote: »

Well done, i think uve made the right decision. The majority of MFW's on this site should join moneywastingexpert.com. Most mortgage owners are in a position where they'd be better off by getting the best mortgage rate and saving there excess money at a higher rate. This is the moneysaving solution but many have an unhealthy obsession of paying there mortgage off as ASAP despite wasting money. It appears that the failure of endowments has created irational thinking group that dont realise that an interest only mortgage with investment is still the cheapest and can be just as safe as a repayment mortgage (if using cash ISA's).

I don't see how saving money whether to put onto your mortgage or into an ISA, Pension or any other form of investment/saving plan can be called "Money Wasting". In my book, money wasting is buying the latest plasma TV because your old one was only 36" and now they are out at 50" or buying a new car every three years because you don't want the hassle of an MOT and because Mr. Next Door has just got a new one.

I must admit I'm getting tired of all of the sweeping generalisations that are made about people who are paying down their mortgages. What may be a good strategy for Mr Moorcroft here isn't necessarily a good one for everyone. Take me for instance, I'm now running my own company which will entail periods without work (like this week for instance). To cover myself I am paying a large amount of money into my offset account so that should I need the money quickly, I'll be able to get at it with no penalties. If I were to put them into anything other than a cash ISA, I wouldn't have this easy access.

Once the offset has enough emergency cash in there, I'll be making direct payments onto the mortgage so that my monthly outgoings are less, which then allows me to make greater overpayments, which then makes my monthly outgoings less. Yadda Yadda. There is a possibility that I may lose a few pounds by not investing in the stockmarket instead of making this overpayment, but at least my overpayment is guaranteed. Does no one remember the stockmarket crash(es)?

Other people have their own reasons for choosing to be a MFW that are as valid as my reason. Not everyone has a cast iron job with a set regular income that they can plough away into shares on a monthly basis over several years. Also not everyone has the time, knowledge or inclination to monitor the markets for the right stocks/funds.

Sorry for ranting on, just wanted to add my 2p to the debate

Broke_Student

Hi. Im a student and am never usually on this board. I actually read the thread by mistake but it got me thinking...

If you have ~50k on a mortgage on a low rate (lets say 5%) and ~50k in savings at a higher interest rate (say 6%), surely you are financially still better off paying off the mortgage (despite what mosat people here are saying)?

My reason being that you would not make much profit in the savings. On top of this the savings will probably be taxed 20% or 40% and after tax you might even be recieving less interest than your mortgage is costing.

Im sure some of you are thinking 'ye but ISA's are tax free'. That's true but I still believe it is cheaper to pay off your mortgage due to inflation!? If inflation is 4% but you are making a 1% profit in an ISA then doesn't it mean the value of your money is actually decresing? It would therefore only be worth saving if your savings recieve interest at such a high rate that it beats the mortgage rate, after tax, whilst still taking into account the rate of inflation?

Somebody please tell me if this makes any sense lol. Im know nothing about property and am not an economics student either. I might be missing something really obvious. This was just a random thought...