Mortgage pay off advice please

heckmondwike06

Hi all,

I would like to pay off my mortgage within next 6-8 months, and I am looking for useful friendly advice please.

Halifax repayment mortgage: £70,000 (inc. £2300 in early exit fees & charges!)
APR: 4.99%
Term: 29 Years & 4 months
Repayment: £375PCM
Special rate expiry: 18th April 08

Halifax have said that I can pay up to £7,000 this year without any charges.

I would like to make overpayment of £7000 per month until mortgaged is fully settled.

What is the best way to proceed? If I was to continue with £7,000 overpayment per month how much penalty will apply? Or should I save this money in some sort of saving account (tax free ISA £7,000) and then pay off on 19th April 08?

Many thanks and look forward to your responses.

Dithering_Dad

Hi, if I were in your position I'd pay the max I could without penalty and then save the rest until the 19th April 08. You should be able to find a decent savings account and Cash ISA option that will match or beat your quite low mortage interest rate. The alternative is to repay your mortgage and end up losing money by paying charges - not terribly MSE!!

Besides, it's only another 11 months to go.

p.s. it seems strange though that you now have 7k a month to repay off your mortgage having previously been paying £375 with a mortgage term of 30 years. Did you suddenly decide to go SAP HR/Payroll contracting? :rotfl:

heckmondwike06

Thanks for advice Dithering, started off my own business and new contract as Project Manager therefore, willing to clear off mortgage. I have had my mortgage for last 4 years, switched three times to save money but never really had enough to pay it off or more like the drive to pay it off!

Having read 'Pay off your mortgage in two years' and discovering this website has been a truly life changing experience. I am claiming thousands back from banks and really would like to thank Martin for this!

The charges according to Halifax for early payment are £2,300 - I am assuming these are payable on final settlement figure or paid pro-rata?

I am looking to invest £14,000 in two cash ISA accounts (in wife and my name), can you still invest £7,000 per person? Looking to get best rate for my savings, do you have any accounts you'd recommend?

CLAPTON

given the low mortgage APR of 4.99% in relation to the high exit charge of £2,300 i would suggest you only pay off the amount allowed this year without any charges and save everything else in the best saving a/c you can find.
as you need the cash in 2008 you should only consider cash savings.
so you can use cash ISA of 3k each person and then the best normal saving a/c s for the rest.

heckmondwike06

Having sought advice from Halifax, they say that I will incur £3,500 in interest charges by April 18th 08 if I were to pay only £7,000. With this in mind, should I pay off and just pick up early payment charges at £2300?

Your views are most welcome, especially if you're more clued up in mortgage arena (as clearly I am not!); many thanks for all those who have contributed to this thread!

md_14uk

heckmondwike06 wrote: »

Having sought advice from Halifax, they say that I will incur £3,500 in interest charges by April 18th 08 if I were to pay only £7,000. With this in mind, should I pay off and just pick up early payment charges at £2300?

It's a tricky one, i'm assuming you're a higher rate tax payer so the best savings accounts that you can get are not as good as they first appear. Mini Cash ISAs are available at more than 4.99% but then these are limited to 6k.

The best savings account at the moment is 6.05% (higher rate tax payer, 3.63%).

Lets have a look (warning these are 'fag packet' calculations and I may have missed something!;

Paying £7,000 pm into ICICI at 3.63%. From 1st June to 1st Apr will earn you around £1,400.
Paying £6,000 into cash mini ISAs (at say 5.5%) now will earn you around £275.

So that's £1,675 less the cost of the estimated mortgage interest at £3,500 is £1,825 which is cheaper than your penalty fee of £2,300.

You could get more interest by using one of the monthly regular saver accounts as well as the ICICI... see here