Should I pay my mortgage off?

beckysbobbles1

Hi,

Due to an inheritence I am in the lucky position of being able to repay my mortgage off in full at the age of 26.

I have put off doing this so far as I have the money invested earning about 6%p.a. and growing. My mortgage rate is only 2.5%.

I switched the mortgage to interest only as at the time it helped having the payments lower. But now I am considering my options.

I earn a good salary and could afford to switch back to capital repayment but I would miss a few of the luxuries that I am used to.

I believe I have the three options as in the poll.

The mortage is variable so there will be no early repayment charges. The only costs will be in liquidating my portfolio.

I would still be left with a portfolio of £110k to have as a fall back for the future.

Bufger

When does your current mortgage deal end? Does it have an early repayment fee?

Personally for me the feeling of no mortgage would outweight the 6%/2.5% offset you have going on

StuC75

If the money is invested risk free and earning 6% and you are comfortable paying the interest only element of the payments, then surely its best to continue as you are as the interest earnt is higher than what you are paying.

Until such a time that savings interest is lower than the mortgage rate then you are earning money this way.

Just need to retain the control to not dip into that amount..

What about option D, "Remain on Interest only & make additional payments when possible to over pay on the mortgage".

This keeps your portfolio intact, but allows overpayments as & when..

Thrugelmir

Switch the mortgage onto a repayment basis.

Stock market might fall.

Interest Rates may rise.

Why not draw an income from your investments?

beckysbobbles1

Thanks for the replies. I should give a little more info.

The rate is the lenders variable rate so it's 2% above base rate so it won't change until the base rate changes.

Obviously the investments are not 'risk free' however I am comfortable with the level of risk I am taking.

Option D is a very good one and one I may seriously consider.

I am drawing an income from the investments. I don't 'need' this money so I am a little concerned with the amount of tax I am paying however this can not be avoided as the stocks are producing good dividends so I can't really complain.

Thrugelmir

Use your ISA allowance every year to shelter your investments from tax.

Obviously the investments are not 'risk free' however I am comfortable with the level of risk I am taking.

The risk I'm referring to is a market correction. The share indexes will turn red across the board. So there's no where to hide. A 10%, 15%, 20% fall......

Money is driving the stock markets higher as retail investors chase yield, not underlying company profitability which is falling. There's never any harm in realising in a profit.

Do you contribute to a pension scheme?