Should I pay off my mortgage discussion

jamesd

ghil35, if one part is at a higher interest rate than the other, that's the one to do first. Otherwise I'd do the repayment aprt first because that'll leave you more flexibility to reduce payments later as the interest only part becomes a higher proportion of the mortgage.

If you can get a better savings rate than the mortgage interest rate you're losing money by paying off either instead of using the savings (or investments).

Trying to be good, neither will save more money than the other unless the two parts are at different interest rates.

ghill35

Thanks Trying To Be Good and JamesD,

for info, both parts are at the same interest rate.

I am a higher rate tax payer, so it is difficult to get a better savings rate, I have also filled up my mini cash ISA allowance for this year. Current mortagage rate is just over 5% fixed, so I think overpaying is a good choice in my circumstances.

BlueberryBee

I've been reading the forums a lot recently, but can't find anything along the lines of my query (apologies if it's out there somewhere and I haven't seen it!). I hope this is the right forum...?

I'm really close to paying off my mortgage (yippee!) and wondering whether this is the right thing to do. I'm looking to set up a business in the next 3 - 5 years and will need capital (c. £10k - £25k).

Having overpaid my mortgage, I have an "overpayment" fund of about £40k.

Is it better to:
a) pay off my mortgage and apply for a separate loan as/when I need it?
b) pay off my mortgage and remortgage when I need the capital?
c) leave a minimal amount on the mortgage and access the overpayment fund when required?

Any suggestions/opinions would be greatly appreciated...

jamesd

ghill35, NS&I index-linked savings certificates may pay more than that mortgage costs without much investment risk. With more risk the BlackRock UK Absolute Alpha fund has been doing very well at its job of providing stable returns but has no guarantee. It's the red line in this performance chart, blue is the FTSE All-share index. Can be held efficiently inside or outside a S&S ISA since it doesn't pay income, just capital growth.

BlueberryBee, the disadvantage is that the mortgage is a secured loan so you could lose your home if the business fails but it will be the cheapest funding that you can get, so it's probably the best choice. Keep that mortgage funding available as long as possible since it's cheap money when you need it and in the meantime it's helping your credit rating with a series of regular payments.

Eagertobemortgagefree

Martin says that if the interest rate on savings is lower than mortgage then to pay off mortgage... Sounds like good sense to me. My dilemna is whether I should close some ISAs to pay some extra off the mortgage as he also says to make sure you use your ISA allowance.

I have been working hard to pay off my mortgage which is now down to £16,000. (I closed previous ISAs and savings accounts and have made huge monthly overpayments instead of putting money into savings). I'm struggling to get further because instead of making the overpayments I've been doing over the past few years, I've put some money into a new ISA and started saving for the next one. I also need to pay for a rather expensive holiday - the boyfriend likes luxury and won't compromise!

I have approx £11,500 in savings - the majority in ISAs, but about £3,000 of it in HiSave (the saving for next ISA fund). My mortgage is flexible - I can make as many overpayments as I like and can get money back if I need to, but the rate is currently 6.74%. My best ISA is 5.80% (opened quite recently when it was a good deal) and the HiSave pays 6.16%AER. According to IPTW that isn't enough. The question is... do I close these accounts to pay a lovely big chunk of the mortgage? or is this just silly because I can't replace the cash in the ISAs, even though the interest rate isn't high enough?

Please advise as to the best thing for me to do

Dithering_Dad

It depends what you intend using you ISA savings for. If you are intending to use them to eventually pay off the mortgage, you may as well cash them in now and pay your money directly onto the mortgage (excluding emergency money).

If you're going to use the ISAs to fund your retirement then I'd hang onto them because it's tax free income and because the longer you keep the investment, the longer it has to grow. I'd look at investing in S&S Isa's though rather than cash ISA's because long-term your cash is eroded by inflation.

roddydogs

Re paying of mortgage-arnt we missing something in that if you dont pay off your mortgage, and you keep that amount of money invested, you still, at the end of your Mge term have your original sum?
Example-Mge£25,000 costs £220.50 PM, 15 years to go, so x12x15 so over the next 15 years it will cost me=£39690.
If i Keep the same amount in a high rate a/c=5% after tax, so £25000 x 5%X15=£18750 interest plus my £25,000 that ive still got=£43750, so by leaving my mortgage t as it is, i will be
£4060 better off-yes i know in 15 years time, inflation will reduce its value by say,1/2, but its still something. it will actually be more than that as ive not compounded the interest.if someone could do this id be grateful!
Have i got it wrong, or what?

angelavdavis

Eagertobemortgagefree wrote: »

Martin says that if the interest rate on savings is lower than mortgage then to pay off mortgage... Sounds like good sense to me. My dilemna is whether I should close some ISAs to pay some extra off the mortgage as he also says to make sure you use your ISA allowance.

I have been working hard to pay off my mortgage which is now down to £16,000. (I closed previous ISAs and savings accounts and have made huge monthly overpayments instead of putting money into savings). I'm struggling to get further because instead of making the overpayments I've been doing over the past few years, I've put some money into a new ISA and started saving for the next one. I also need to pay for a rather expensive holiday - the boyfriend likes luxury and won't compromise!

I have approx £11,500 in savings - the majority in ISAs, but about £3,000 of it in HiSave (the saving for next ISA fund). My mortgage is flexible - I can make as many overpayments as I like and can get money back if I need to, but the rate is currently 6.74%. My best ISA is 5.80% (opened quite recently when it was a good deal) and the HiSave pays 6.16%AER. According to IPTW that isn't enough. The question is... do I close these accounts to pay a lovely big chunk of the mortgage? or is this just silly because I can't replace the cash in the ISAs, even though the interest rate isn't high enough?

Please advise as to the best thing for me to do

If you want to keep the ISA allowance, why not simply draw out the interest you have made on the ISA and keep some in there so can benefit from any money made to pay off the mortgage, but keep some of the investment?

You could make the ISAs work a bit harder too if you choose - if you have in excess of £9k to invest (including in existing ISAs), you can transfer the ISAs to Lloyds who are paying 6.5% on balances over £9k (keep in the account for 12 months minimum).

As a mortgage free wannabee, I guess I am quite biased. Personally, if my mortgage balance was as low as yours, interest rate as high and my savings almost met the remainder, I would cash the savings in and settle the mortgage, thus freeing up more cash for future investment.

sammybee

now im confused after reading these letters, i can pay off my remainder 20k mortgage with my savings, i pay 6.65% and get 6% on my savings, i will still have about 2k for a rainy day, should i or shoulnt i pay it off ??????????

bootman

I checked my mortgage balance today and have £28k left. I hope to clear it this year. We are paying in every penny we have each month to get it down.

I felt a bit worried the other day as a few other posts were saying better off saving than paying, but looking at the fact since December I have had just over £300 debit interest charged to the mortgage account there is no way that any saving would pay me that sort of credit interest so I am definitely sure that clearing the lot off with all that we have is the best thing to do. We may be left with no saving but we will just be able to save what we would have paid out.