Should I pay off my mortgage discussion

Jonbvn

Hi,

Generally, it is not considered a good idea to completely pay off a BTL mortgage, since you get tax relief on the interest payments.

Overall, I believe it would be better to invest/save the money you would overpay into tax free vehicles such as ISA's and pensions.

Of course this is only general advice, and it would be necessary to check the actual numbers and your financial situation to give specific advice.

thriftybabe

We currently pay the maximum into our pensions at the moment and have already fulfilled 3k each for ISA's. After xmas we will be using the remaining 4k each for stocks and shares ISA's. Do you think that will make a difference in paying it off?

jamesd

Maximum possible investing will certainly help to pay things off. Remember that you can also buy unit trusts and OEICs outside of the ISA tax wrapper and except for income there won't be tax to pay provided sales don't exceed your annual capital gains tax allowance.

One thing about BTL, remember that you can use a normal residential mortgage on your own home up to the purchase price of the BTL instead of taking out a BTL mortgage on the BTL property. The interest rate for a residential mortgage can be significantly lower than for a BTL mortgage.

Pension maximum for tax relief is 100% of salary, or 3600 after tax relief if no salary. Just mentioning this in case you were limiting it to only what an employer will match.

thriftybabe

Sorry james, i have no idea what OEICs are? Excuse my ignorance. We are directors of our own company and we take a lower salary higher dividends. therefore I thought we were maxing our pension limit. The company pays the whole of our pension.

jamesd

OEICs are open ended investment companies. Just like a unit trust but with only a single price for buying and selling instead of one for each.

I can't comment on pensions for directors - not an area I'm familiar with so I'd be as likely to mislead you as help.

grannybroon

I am sorry, I am really tired and not read the thread. So please bear with me!

In 1973 we took out a huge mortgage (at the time) with a 7 year deferred interest option. We got 3 times DH salary and a half times for mine! The rate in the 70's went up and up and we could hardly make ends meet. DS and DD following this 7 year period. We added on £1000 for central heating when DS born (now needing updated next year we think!!) There were times then we fed the kids properly and we had beans on toast. Had to really tighten the belts.

Mortgage due up next June to finish. We are paying off £6000 grand capital in December (leaving only about £2000 but interest added in December for a full year in December so trying to save some or our capital). We are quite well off but trying to do the best financial thing.

Do you agree?

GB

Jonbvn

grannybroon wrote: »

I am sorry, I am really tired and not read the thread. So please bear with me!

In 1973 we took out a huge mortgage (at the time) with a 7 year deferred interest option. We got 3 times DH salary and a half times for mine! The rate in the 70's went up and up and we could hardly make ends meet. DS and DD following this 7 year period. We added on £1000 for central heating when DS born (now needing updated next year we think!!) There were times then we fed the kids properly and we had beans on toast. Had to really tighten the belts.

Mortgage due up next June to finish. We are paying off £6000 grand capital in December (leaving only about £2000 but interest added in December for a full year in December so trying to save some or our capital). We are quite well off but trying to do the best financial thing.

Do you agree?

GB

I really don't understand what you question is nor what your situation is????

So you have had a mortgage for 34 years???

Please clarify???

jamesd

gannybroon, your plan sounds reasonable provided it leaves you money to use both of your annual ISA allowances. Using those comes first.

seniorop

Hi all
MSE newbie here and hoping for some advice on the following:
we have a mortgage of £15k remaining, an endowment of £17k ( currently predicting total of 22k at maturity in July 2008) plus another endowment of £10k due to mature 2012.
current mortgage payment is £94 per month at 7.21% on a full std variable rate with Std life --however we have been paying £200 per month to reduce the capital a little each payment ----it has 3ys 9 months to go
We have cash Isa's invested from previous years to value of around £25k but have yet to use this years allowance
Question is ----would we be better to pay off the mortgage in July from the first endowment or do we keep the mortgage going and invest the expected £22k into a savings account ( not stockmarket)
Both still working and hubby is a higher tax payer plus 2 kids at uni ( arrgh financial drain!!!)
any help/ guidance would be greatly appreciated

jamesd

Paying off the mortgage with the endowment seems reasonable if you don't want to invest the money.

Until then you might look at a zero fee remortgage to save a bit of interest. The interest rate will probably be around 6.5-6.75% but that'll still save you some money.

It sounds from your "not stockmarket" aside that you're currently voluntarily paying extra tax by not using the stocks and shares ISA allowance. If you're worried about the markets you might just need to learn a bit more about how to protect yourself from their swings by investing in a range of funds investing all around the world and in corporate bonds and absolute return funds. The US and Western Europe are in the doldrums but just about everywhere else is booming so a good spread around the world keeps things in good shape.

Savings accounts aren't a good choice for long term money. OK if you need money for kids financial drain, though. But higher rate tax payers who can lock their money away should look at the NS&I three and five year index-linked bonds because those are currently offering better returns (after inflation) than typical savings accounts. You can take the money out early, with reduced interest rate.