Should I pay off my mortgage discussion

co123456

Thank you for the replies.
I looked at the Halifax International account however its not for me whilst I have a mortgage.
I'm a high rate tax payer.
Come 1st of June, NR will move me to their standard rate (7.34%?)
Remortgaging is out of the question primarily due to the small amount of debt.

jamesd

If you're somewhere close to 55 you could go with the pension mortgage option: investments in a pension to get the higher rate tax relief, take the 25% tax free sum to clear the mortgage, once you're 55 and the investments are enough to do it, and leave the 75% for pension income whenever you choose to take that income, leaving it invested until you do.

Remortgaging seems likely to get you a better deal than the 7.34% NR one, even with a no or minimal fee deal for an offset mortgage. 36k is easily enough to find many mortgage offers and you can then stooze or whatever else into the offset account if you can't find alternative ways to make more money. That gets you more flexibility and avoids the risk of having to pay credit card interest rates.

Corporate bond funds or just plain corporate bonds inside a stocks and shares ISA are likely to do a fair bit better than 6.09%.

More marginally, there are the inflation-linked products from NS&I but inflation may not be at current levels long enough to keep them doing better than 6.09% tax free for long enough to matter.

The possible returns in my current experiment at Zopa comfortably exceed 6.09% after fee, bad debt allowance and higher rate tax but it's too soon to know what the actual bad debt rates will be for me; the overall ones are substantially lower than the allowances so far, during the benign economic conditions that have prevailed so far.

If you have a spouse who isn't a higher rate tax payer there's also the option of putting the money into their name to get their tax rate.

co123456

Thanks for the reply.

The stooze to profit route is something I would consider in the future however my goal is to become mortgage free first.

I have no plans to use the mortgage to make money – only to clear it down to near zero as soon as possible so to avoid NR’s high (to me) standard variable rate.

Given the two options in my original post, which would you choose?

jamesd

The option that leaves the mortgage available is the lower risk of the two options, but neither appears to be prudent financial planning.

getmore4less

cheeryoleary wrote: »

Thank you for the replies.
I looked at the Halifax International account however its not for me whilst I have a mortgage.
I'm a high rate tax payer.
Come 1st of June, NR will move me to their standard rate (7.34%?)
Remortgaging is out of the question primarily due to the small amount of debt.

Why is a remortgage out of the question how much debt, whats the LTV.

Getting a better deal maybe an offset and a stooze pot could be the way to go keeps the option of lower cost lending open and a cash flow buffer.

Stooze to mortgage free thats what we did with the safety of not getting trapped on hight rates if the stooze options ran out.

co123456

jamesd wrote: »

The option that leaves the mortgage available is the lower risk of the two options, but neither appears to be prudent financial planning.

I'll disagree with you on the second point. This is Mortgage Free Wanabee so you can see my motivation. That said, I did ask for advice, and you were kind enough to provide it, so thank you.

Outstanding debt is targetted to be 12K.... can't see any mortgage lender wanting to offer me a mortgage for that sum.

Dithering_Dad

cheeryoleary wrote: »

I'll disagree with you on the second point. This is Mortgage Free Wanabee so you can see my motivation. That said, I did ask for advice, and you were kind enough to provide it, so thank you.

Outstanding debt is targetted to be 12K.... can't see any mortgage lender wanting to offer me a mortgage for that sum.

I also thought that your two options were unnecessarily risky. Normally when you stooze a credit card, you place the stoozed money into a higher rate interest account that the credit card rate. Once the deal runs out, you either balance transfer to another card or you repay the money from the stooze pot and keep the interest.

In your case, you will be spending the stoozed money, albeit on your mortgage rather than on consumer goods, but the net result will be that you won't be able to repay the money back at the end of the stooze period and will be wholly reliant on getting another BT deal. If you can't get a deal you will be left having to pay the credit card SVR and will effectively have a +25% 'mortgage' rate.

As you've already identified, you will find it difficult to get credit elsewhere but the main worry would be if you lost your job. With a mortgage you can have payment holidays, go interest only or add the arrears onto the term of the mortgage. With defaults on a credit card, you'll have much less room to manouver.

There are specialist mortgage brokers who will help you find a good rate for your small mortgage. I'd have a look at this option first and if you can get a decent rate, make regular overpayments to reduce your mortgage (making sure that you have emergency money - usually 3 months x salary and have your retirment provision in place - i.e. pension plan or ISAs).

Being a MFW is all about reducing your exposure to financial risk. By paying off your mortgage with a credit card, you're actually increasing yours.

jamesd

Mortgages are available down to 10,000. Perhaps lower. However, it'd be more prudent to take an offset mortgage for something over 30k then put the credit card money into the offset account.

It's not just about getting mortgage free, it's also about doing it for lowest cost and/or a balance of risk and benefit. You certainly can do what you plan but it's not sensible.

nickj_2

can you help me with this "no brainer " problem
original mortgage £40,k - paid off £3.5k
endowment surrender value £13-15k
9.6 yrs left to pay + approx £7k endowment shortfall

my problem is that i have savings worth around £18k + endowment will leave me around £5k short - however my dear ol mum has just been left some cash (again :rolleyes: i dunno how she does it ) and has said that she will give me and my brother £5k each .
i suggested to my wife that we pay off mortgage and she gave me an evil look ,just likethe one she gave me when i'd just told her to cut back on her credit card spending - yes it was that bad .
i see it like this , if i pay it off now i'll have around £30k in my pocket:T over the next 9 yrs , if i don't i'll pay the bank and endowment £30k plus i'll have to save another £7k o make good the shortfall . to me it's a no brainer , but to my d/w - needless to say , she's got "plans" .
i should just also add that i pay all the mortgage and endowment -

your opinions will be gratefully received :beer:

Morty_2008

Hi, we are new to this forum, so please forgive us if this has been discussed before; we have a dialemma:

Our morgage ends in 2016 and we are locked in on an interest only fixed rate of 4.79% until July 2010.

We have been paying the maximum allowed (without penalties) of £500 additional payments each month.

Our mortgage is now at £51000 outstanding.

We are in a position where we could potentially pay this off, but will incur a redemption penalty of around £1200. We have avoided this so far, as we are hoping to move house in the future and believe this may be better to invest and have available should we need it in 6-12 months.

Our other savings amount to £120k but this would be required for our move up the property ladder (maybe in 4-12 months).

As yet we have not taken advantage of our ISA allowances for this year, but have an interest rate of 5.2 nett on our savings. We are both tax payers at the standard rate.

Are we better to keep chipping away by £500 each month and maybe speaking to the B/Soc about reducing the term from 2016, as has been suggested in other posts? Is this exempt from penalty charges?

Your advice would be very welcome.