Should I pay off my mortgage?

Watson

I have an interest-only mortgage with the Halifax for £50,000 which comes to an end in March 2020. The current monthly replayments are £309. I have just inherited a lump sum of around £160,000.

My immediate instinct is to pay off the mortgage completely. Is there any good reason why I shouldn't do so?

Many thanks.

kingstreet

What is the mortgage rate?

What net rate can you achieve by investing your lump sum?

Watson

Thanks for your reply. The current mortgage rate is 3.99%. I don't know how to determine the best possible rate from investing the lump sum: there seems to be a bewildering array of options available.

kingstreet

Until you have a meaningful way of comparing the options, we are going to be unable to answer your question.

If you can get a better return on your savings, keep the mortgage. If the mortgage rate is higher than the savings rate, pay the mortgage off.

This assumes you don't plan to move house and take out a new mortgage any time soon, of course.

glosoli

A repayment of 300 on a mortgage of 50000 on interest only would be an interest rate of 7-8%. I'd suggest you pay it off...

kingstreet

If you are on SVR with Halifax, you could look at one of its product transfer rates, around the 2.64% mark, fee-free for a two year fix, if you can research and decide on investments which will yield more than that.

TBH that's outside the scope of this board. You might want to try savings and investments for ideas for that.

kingstreet

£50k interest-only at 3.99% is £166.25 per month. What are you paying on top? Is it repayment?

amnblog

If it makes you feel better to have your mortgage cleared, clear it.

You might just be able to make a mathematical case to keep it but do what feels right to you.

Watson

Sorry about the confusion with the interest rates. I took a hasty look at the information, and misread it. Looking again, I see that I'd forgotten that the mortgage is only partly interest-only. The breakdown (which is way more complicated than I thought it would be) is apparently:

Sub-account 1 £960.48 monthly payment £13.56

Sub-account 2 £2443.64 monthly payment £34.49

Sub-account 3 £22.14 monthly payment £0.70

All three are on the Halifax standard variable rate, currently given as 3.99%

Sub-account 4 £258.99 monthly payment £1.36

Sub-account 5 £49,251.05 monthly payment £258.07

Both of these are at a rate of 6.39% fixed until November of this year.

Now that I've seen just how convoluted all this is, I'm pretty well determined just to pay off the whole thing and have done with it.

Watson

amnblog wrote: »

If it makes you feel better to have your mortgage cleared, clear it... do what feels right to you.

Thanks for the advice. I've just posted that I've more or less decided to get rid of the mortgage, purely to be rid of the hassle.

kingstreet

You'll have early repayment penalties to pay on some of those sub-accounts, if you pay them off before the penalty period expires. Find out how much before paying it off gets more expensive...!