Should I pay off my mortgage discussion

ailuro2

With a 4.79 % mortgage rate it makes it feasible to find a better home for your money than overpaying your mortgage. Do the sums, but avoid coming out of a good mortgage deal like that, and paying for it!!

jamesd

nickj, imagine me giving you an evil look. What could you make over the years if you don't use the money to repay the mortgage? You need to compare both the repay and the not repay options. You can get 10% before tax from the Halifax International regular saver, putting in 100-2,000 per month for one year. If you or your wife are basic rate tax payers that's 8% after tax and that's going to be more than your mortgage interest rate. If she's not earning then it may be tax free if in her name. And that 10% would be way over the mortgage interest rate.

It's easy to make yourself worse off financially be clearing the mortgage. Some people want to do it anyway but you should at least work out what it's really costing you to do it.

jamesd

Morty_2008, I don't see any prospect of you being better off financially by repaying. It's easy to make more than 4.79%, with 8% after basic rate tax available from the Halifax International regular saver account.

I wouldn't be chipping away with 500 a month. I'd be taking the money back out and making more from it by saving or investing it somewhere.

Paying a penalty to end that mortgage deal early would be a poor idea unless you're doing it because you're selling and the mortgage isn't portable.

PaulSB

First time I've asked for advice on here though I've spent many a happy hour reading.

Our 4.79% Fixed Rate with Northern Rock ends October 31st - which is a bit sad! We have £47500 outstanding which I'm thinking of remortgaging with Abbey who have offered 5.99% fixed for 5 years 10 months when I retire! All our financial planning is geared around my 60th birthday. The mortgage with Abbey would be £25k interest only (covered by a pension plan), £20k repayment and monthly payment of £500.

I was planning to take this up until I realised the total cost will be just short of £62000 in the period. I am in a position to pay off the debt completely. I'm beginning to think we should pay off the debt now because:

1. Over the period we would save £35000 in repayments - which would be saved not spent
2. The pension plan would be £25000 better off

3. With no mortgage we don't run the risk of fixing at a much higher rate than we have had for years

My logic is this - pay out £47700 today, save £35000 in the period plus the £25000 lump sum gives me £60000 at age 60 plus whatever I can earn with the £35000 payments.

Does this make sense? Id love some comments because it just seems too obvious to me.

Thanks

PS my wife is a basic rate tax payer, I slip into the higher rate but only just

Morty_2008

jamesd wrote: »

Morty_2008, I don't see any prospect of you being better off financially by repaying. It's easy to make more than 4.79%, with 8% after basic rate tax available from the Halifax International regular saver account.

jamesd wrote: »

I wouldn't be chipping away with 500 a month. I'd be taking the money back out and making more from it by saving or investing it somewhere.

Paying a penalty to end that mortgage deal early would be a poor idea unless you're doing it because you're selling and the mortgage isn't portable.

Thanks for the advice;

Since our last post, we have had some more news from the Building Society;

We can switch over to a repayment mortgage immediately AND reduce the length of the mortgage from 2016 down to 2010.
The B/S has said if we do this we can ALSO keep the 4.79% rate that is fixed until July 2010.

They have said all this can be done with NO penalty / redemption / set up cost! :j

The B/S has estimate that if we therefore pay £2500 a month for the next 21 months we will be mortgage free by August 2010.

By my calculations, I avoid paying interest only & still having the original debt at the end of the term, while still earning interest on my savings!

Is this really too good to be true or are we missing something?

jamesd

Morty_2008, you're missing what happens if you put the money into savings accounts instead of using it to pay off the mortgage.

Say you have 500 a month available and you have the choice of using it to reduce the mortgage or putting it into a cash ISA paying 6%.

Do the 4.79% mortgage for two years and you've paid off 12,617 of which 617 is the saving in mortgage interest.

Do the ISA instead and you'll have accumulated 12,779 of which 779 is interest. Then you pay off the mortgage and have 779-617 = 162 more money than paying off the mortgage directly.

You can mix the two, using ISA up to the ISA limit and a changed mortgage term for the rest.

If you can't be bothered to do the saving approach, what you've been offered is a good deal for doing what you want. It's definitely the least hassle.

sandy_newbie_money_saver

I am still not sure having read the article
My husband and I have a mortgage of £13,000 and 4 years left on a 25 year endowment mortgage Yes it ids under performing but it was for 23000 and we paid off 10,00 about 10 years ago so it should clear the debt. We have 18,000 in AL ISA's can someone abit more savy explain should we pay off the mortgage with the ISA savings?

Dithering_Dad

sandy_newbie_money_saver wrote: »

I am still not sure having read the article
My husband and I have a mortgage of £13,000 and 4 years left on a 25 year endowment mortgage Yes it ids under performing but it was for 23000 and we paid off 10,00 about 10 years ago so it should clear the debt. We have 18,000 in AL ISA's can someone abit more savy explain should we pay off the mortgage with the ISA savings?

Nope, you'll lose the tax free status of your ISA savings forever and for no real gain. You only have 4 years left and your endowment sounds like it will will more than cover the mortgage.

I'd ask for an estimate on the value of your endowment and if it will easily cover your mortgage when it matures in 4 years I'd change the mortgage to interest only and put all of the repayment part of the mortgage, plus any savings you can spare into your ISAs (cash or S&S).

After 4 years you will be mortgage free and have a larger amount of money in your ISAs, whose growth will be protected from tax.

juliecottam

MSE_Wendy wrote: »

This thread is specifically to discuss the content of the

Should I pay off my mortgage article

To discuss or ask a question about the article: click reply

we have £200,000 mortgage intrest only we have the money to pay it off shall we do this or maybe pay off half

DrMopp

My husband has been dismissed on grounds of capability. He is disabled and his company cannot make necessary adjustments to his role or find him a different job. He was earning 50k a year and we have a mortgage costing 1k per month. (which was easy to pay when he worked).

His company have told him they will pay him an ex gratia payment of 30k seeing has he has worked for them for 12 years.(nice of them. lol).

There is no way on this planet, that he can get another job earning that sort of money. The best he has seen is around 25k per annum for the same job.
He has applied for a few jobs but not getting anywhere. So he made a claim for benefit the other day. Good grief, what a fiasco, we have never claimed before! It was a bit of a culture shock to be honest!

They told my hubby that as long as he turns in his sick notes from the GP he can claim incapacity benefit back to when his SSP ran out and his company waved bye bye.

Thing is because he will recieve the 30k they won't pay anything to keep his wife and disabled child??

We have no choice but to reduce our mortgage payments.(or do we??)If we use the 30k to reduce our monthly mortgage liability he will have more options in the job front.

We are new to all this, having always worked, and we really don't know what to do.

We have no credit card bills but our council tax is 1500 per annum and just to heat our house cost around 200 a month. Yes we have all the energy saving gizmos you could ask for. We just live in a very cold and windy place.

If anyone has any advice I would love to hear what I should be doing.

Thank you. sorry it was so long