Should I pay off my mortgage discussion

jamesd

Segi, there is probably an early redemption charge in there because of a fixed term or discount period. However, 8,000 in penalties from a 90,000 outstanding balance is about 9% in penalties and 3% is usually about the maximum penalty for leaving early. I suggest that you start a new discussion just about your situation in the mortgage section and also in the saving and investing section.

For the mortgage discussion, say what company the lender is, what the interest rate is, when the mortgage was taken out, what the payments are and the details of the redemption figure and charges you're being asked to pay. Your income will also be needed to get some idea of whether you could get a better mortgage deal elsewhere.

For the saving and investing discussion please give all details you can about your income, its sources, how much the insurance payment was and roughly how much a month after tax income you need to live on as a bare minimum and a as desirable level. To give some idea, an investment of 90,000 could be expected to produce an income of 5,400 a year indefinitely. Probably rising by a percent or two each year plus inflation if professionally managed, maybe more. If you have a competitive mortgage deal that could beat paying off the mortgage with the lump sum, over the long term.

amansell7

I paid off my mortgage over a year ago best move you can ever make......

trippy

Hello. I have just read the article and want to double check the following...

My mortgage interest rate is 4.94% so the calculator says I need 6.2% on a savings account.

If I put my overpayments into a Cash ISA @ 6.3% is this the right thing to do or does it just work out more or less the same so I'm better off reducing my debt?

I am on interest only so surely anything I can do to reduce the capital would reduce the repayments and then give me more to use to reduce the capital?

Sorry for being a bit thick.

Dithering_Dad

amansell7 wrote: »

I paid off my mortgage over a year ago best move you can ever make......

Meeting and marrying Mrs Dither and having kids were the best moves I've made

jamesd

trippy, you need 6.2% on a taxable savings account. You only need more than 4.94% on a tax free ISA account. The 6.3% ISA makes you 1.36% more in interest than you pay on your mortgage. Leaves you about 41 better off in the first year if you put in 3000 at the start of the year. Grows each year you continue to do it.

beaglehaslanded

About 5 years ago we received the dreaded "endowment shortfall" letter.
After careful research we got in touch with an IFA who gave us several options and plenty of time to think them over.We took the worst case scenario and allowed for a 12k shortfall in the endowment.We remortgaged out of what had become a bad deal and used the savings from a new deal to fund a part repayment/part interest only deal on a low fixed rate 3 year deal.That deal allowed us to overpay £500 a month.At first this was hard as the actual amount hadnt dropped. just chaged in its objective.But gradually month by month it became easier with the interest savings.We got to the stage where weve even paid off the (possible) £12k shortfall.We now have a very affordable interest only mortgage which is still dropping.My advice would be make the most of your overpayment facility.Its all very well using your ISA allowance 1st but time was the issue with us.It would take too many "missed opportunity" months to reach our ISA target.We found by overpaying our mortgage in the long turn we could then do both.As the outstanding amount is now nearing our endowment sale value(NOT SURRENDER VALUE) overpayment will allow us to be mortgage free years before we would otherwise.Im fully aware that an investor will take the terminal bonuses and profit by our selling the endowment.The important issue for us is the endowment was only ever a repayment vehicle and if it can repay early and save us money then Im happy to sell it to the highest bidder.Im not saying this would be true for everyone but in our case with research,advice and always shopping around we are nearly there ,just waiting for our present fixed term to end.

bingo32

I just found that its easier than i imagined to overpay, and thought i should share.
I have a nationwide fixed rate repayment mortgage, and it seemed quite complicated to keep track of overpayments.

I can officailly overpay by upto £500/month for free, but have learned that they do not collect penalty fees of less than £7.50 (or £10?)

So i will overpay by exactly 638.13 (one months payment), then I know I have a spare month in hand, and there will be no penalty.

so if necessary i can cancel future monthly payments against the overpayed ammounts, and is easy for me to keep track off...

You have to ask them to calculate the maximum you can overpay without charge though - I think its calculated against how long is left in the fixed term and mine only has 6 months to go - so i could overpay by over £3000 per month without being charged at all. just thought that might be useful for someone to know

tsmiggy

This paying off of mortgage thing as always bothered me,but i have only £1500 pounds left on a tracker paying 1% over the base rate.Surely any surplus funds would be better used paying off my mortgage,or am i wrong

cheers

[Deleted User]

bingo32 wrote: »

I just found that its easier than i imagined to overpay, and thought i should share.
I have a nationwide fixed rate repayment mortgage, and it seemed quite complicated to keep track of overpayments.

I can officailly overpay by upto £500/month for free, but have learned that they do not collect penalty fees of less than £7.50 (or £10?)

So i will overpay by exactly 638.13 (one months payment), then I know I have a spare month in hand, and there will be no penalty.

so if necessary i can cancel future monthly payments against the overpayed ammounts, and is easy for me to keep track off...

You have to ask them to calculate the maximum you can overpay without charge though - I think its calculated against how long is left in the fixed term and mine only has 6 months to go - so i could overpay by over £3000 per month without being charged at all. just thought that might be useful for someone to know

Does that figure of £638.13 include the standard allowance of £500 or is it in addition to it?

Unfortunately our early repayment fee with Nationwide (3Yr fixed) is a 2% flat rate on all overpayments in excess of £500 a month (according to the Web site), and doesn't diminish with time; and if you exceed the overpayment limit you're charged on the entire overpayment amount (including the 'allowed' portion). That means that overpaying by £500.01 would incur a £10 charge. I have a sneaking suspicion that the previous fixed-rate deal we had with Nationwide had a diminishing early repayment fee, but it looks like they've changed that.

jamesd

tsmiggy, the amount outstanding doesn't change what's best unless there are fixed administrative charges. You're close enough that it's worth looking at the costs of having no mortgage (deed storage say) so you can decide whether keeping a small mortgage indefinitely is cheaper than having no mortgage.

bingo32, some people also reduce the term of their mortgage to increase their base monthly payments. Usually a small fee to do that.