Should I pay off my mortgage discussion

mrsmoneypenny9

ok i dont think i explained my situation properly so please let me try again, we have 30k in isa already, my dh is being made redundant in aug and that should give us aprox 15k plus notice = 20k, i am paying an endowment policy 55 per month, cash in value is 17700, my mortgage cost me 355 per month, my dh is hoping to go self employed so there he will be using his tax allowances for that.

I have already used this years isa allowance for both of us, hence the 30k savings.

so really is i pay off our mortgage using the endowment and his redundancy money, we will be mortgage free and our outgoings will have dropped by £410, and we will still have 30k in cash isa's.

If my dh earns enough we will continue to pay into our cash isa's every year.

I cant find a normal savings account that will pay interest equavelant to the mortgage rate.

so should i pay it off or not

thanks for all ur comments btw.

deefadog

Well if you are going to be better off as you can't get a better rate then personally i would pay it off, you have £410 a month to wards you isa's then for next year!

jamesd

mrsmoneypenny9, since you have 30k in cash ISAs already it's clear that at least one of you must have a total of 15,000 and be able to transfer the ISA money to Ruffler Bank and get their rate of interest, which is higher than your mortgage interest rate.

Cash ISAs can be transferred freely between ISA providers by asking for a transfer form from the new ISA provider. Ruffler are apparently quite helpful if people phone them needing assistance so that's what I suggest you do if you have any questions. Even if one of you has more than 15,000 and one less they may be willing to accept transfers from both of you. If your money happens to currently be split between five different ISA providers, no problem, it just takes five forms to switch it instead of one.

We don't yet know enough about the endowment to know if it's better to keep it or cash it in. We'd need to know the current value, estimated final value, the company it's with, the investments funds it is using, when you started it and when it is due to end. You may need to phone them to get some of this - particularly the exact names of the funds so we can check their performance.

This leaves the question of what to do with the redundancy money. What is your own tax position? Do you pay tax? If not, putting the redundancy money into a high interest savings account in your own individual name and filing for tax free interest payments will get you over 6% interest on it.

If you're paying tax, he could invest the redundancy money at Zoppa.com using their three or five year C market lending and receive a before tax interest rate above 10%. This is not risk free but the risks look reasonable. You might also consider this option for the endowment money if selling it looks reasonable. Note that this is a fixed term investment and your money is tied up for the full three or five years, except for the repayments and interest from the people it's lent to, which is paid to you each month. It provides a regular income stream that you can be pretty sure of to budget around.

Each of these will leave you paying mortgage interest but getting more savings interest than you're paying, leaving you better off than just repaying the mortgage.

Mo_Loves_Angels

Brilliant ! We are also in our 50's and have to make a decision about surrendering or selling an Endowment Policy to capital repay our interest only Mortgage but we are finding it difficult as to what to do. Of course, we want to be Mortgage free !

Mo_Loves_Angels

I think I would be inclined to pay off the mortgage and the money you would be paying into the Mortgage and Endowment would be towards your Monthly Bills etc and any over you could continue to save in the best interest account after an Isa when you have used up your allowance each year! Sounds as though this is possible and we would do the same!

It always takes me awhile to decide and go through all the figures and at the moment we are testing the market for selling our Endowment Policies which are due to mature in 2010 and 2012 respecively. I always seem to do everything with such caution as it is muddling to knolw which is right as maybe I could be wrong but my Financial Adviser said that at the end of the day if you like gambling then let the Endowments mature but if you don't like gambling surrender them or sell them for more. Whatever we decide to do, we will still have a penalty to pay as we have a discounted two year interest
rate which doesn't change until May 08. Immediately, I think of all the monthly direct debits going out of the Bank for the Mortgage intrest and realise the Penalty is a saving if we have to pay either !!!

I think to be Mortgage free is the best Policy

All the very best

M o Loves Angels

jamesd

Mo Loves Angeles, I suggest that you post about your endowments in the mortgages and endowments section. You should mention the amount of any mortgage repayment penalty also. In many cases the endowments come with guarantees that make it a very bad idea to sell them. That's particularly likely with so few years until they mature, a time when it's usually a bad idea to sell them.

Paying a substantial penalty on the mortgage as well makes it look even less likely than usual to make you better off. If you are going to sell the endowments it's most likely that doing it after the mortgage penalty period ends would be the best time. But it would be quite surprising if it actually made sense for you to do it at this point.

Geoffrey_Coan

shelx wrote: »

i had a mortgage of £77k over 21 years costing me £544 a month. i sat down and thought instead of having savings why dont i over pay my morgage . then i thought instead of doing that, i will up my monthy payment by reducing the years that i ow so i know pay £1000 a month but my morgage is over 8 years so i have more that halved my mortgage lentgh and saved my self £48k in interst.

We're in a similar situation, we've currently got two mortgages with the Newcastle BS (took the second one out on the UK house when we bought a French holiday home), but as these are interest only nothing was automatically repaying the debt.
The BS pays charges daily interest so we make our payment the day after I'm paid (to minimise the interest charged) and we make an overpayment of £499.99 on each of the two mortgages - any over payments of £500 or more incur penalty charges against the discount rate deal we're on.
All our other savings (including the settlement for the Endowment miss-selling) go into an ICICI savings account in the wife's name. She is a non tax payer so we earn more interest there than we're charged on the mortgage.
Plan is to have paid of the mortgage in 7 years time ! [unfortunately that's just when the kids are old enough for university so a new debt source will doubtless be coming my way ...]

segi

Hi

I lost my husband about two months ago, and I am wondering if it is advisable to pay off the mortgage on the house, so I asked the mortgage company for a redemption figure. I was sent a final balance of over £98,000 thousand.
Eight thousand was various charges. I have not got enough money as a result and also if I pay this money off, I would not have enough money to look after my 16yr old, basically there will be no spending money.

I will appreciate a good advice please. I have read so much on the internet and it has become so confusing.

thank you
Segi

Dithering_Dad

You need to ask the mortgage company why they are attaching so many charges to your redemption. Perhaps you are currently in a fixed / reduced interest period?

If this is the case, ask them how much you can overpay without charges (this may be a monthly percentage) and do this until you are out of the early redemption penalty period and then pay off the mortgage completely. Meanwhile, look at high interest accounts to store your money safely until you can repay the mortgage.

mrs_deadline

Segi, sorry about your situation - it must be so hard to work out what to do at a time like this.

I would say even after the early redemption period expires, it's not a great idea to pay off the mortgage if it leaves you nothing to live on. The money is more use to you in the bank than tied up in your house, at least until you are certain of your future income.