Should I pay off my mortgage discussion

lisa_s_3

thanks for your reply. I understand the maths there but overall would i not pay less in interest payments if i reduce the loan amount substantially. i.e £3-4k. Also we both work but i am part time and not paying tax at the moment.

rachst

Just wondering if it is worth me overpaying on my mortgage -:

Mortgage - £126k approx with 27 years, 4 months to go (tracker 0.69% above base rate until 2011) 85% LTV
Currently paying £758 a month (before rate cut yesterday which should reduce payment to approx £620ish)
No other debts/loans etc. (I have a credit card but pay it off in full every month)
I currently get 4.41% gross on my savings account and I have used my ISA allowance for this year too (5.25%)
Also, I am not a higher rate tax payer if that makes a difference?!

I am single, live alone with no dependents and can afford to pay approx. £200 above what I am currently paying (total of £950ish) therefore with the base rate cut this will be effectively overpaying £330 a month.

Is this worth doing to reduce my mortgage whilst the interest rate is low?

Lokolo

Of course it is! Get rid of the mortgage ASAP if you want. But you are only paying 3.69% which is pretty damn low so you could if you want put some money into savings.

However 27 years is a long time so once again you may want to go for the overpaying.

Do you have any charges if you do overpay?

rachst

Lokolo wrote: »

Of course it is! Get rid of the mortgage ASAP if you want. But you are only paying 3.69% which is pretty damn low so you could if you want put some money into savings.

However 27 years is a long time so once again you may want to go for the overpaying.

Do you have any charges if you do overpay?

Thanks Lokolo.

No charges - I'm sure my mortgage allows 10% overpayment but will obviously check before I go ahead. Going to set up a standing order so that I can always amend the amount if I need to reduce it for some reason!

Judith_W

I'm not sure whether I should be over paying on my mortgage or paying into an ISA. I know the article says you should always use up your ISA allowance but I have a mortgage at 3% (tracker) on 130,000ish and don't think I really want to lock in my savings into an fixed rate ISA which is the only option now the rates are so low on instant access ISAs.

My morgage allows me to overpay 10% and also to take payment holidays if I need to so I could get at my cash if I put it towards my morgage...

My reasoning is that I am unlikely to be able to pay off my mortgage when the rates are so low again so should I use some of my savings this way, obv keeping some just in case of emergency?

Any advice?

Missalllaw

Missalllaw wrote: »

Hello everyone,

looking for some advice please...

morgage is £98,000 over 18 years, im on a tracker (.9above) which is going to bring my payments down after todays announcemnet. Ive been thinking of paying extra into my morgage since reading over this website and forum over the past 6 months, but not sure if its right to pay extra or save?

I currently pay 12%(total) to works pension and 1% AVC.
I pay £125 a month for share match(buy 1 get 1 free deal at work)
1ve been paying £250 a month into another share scheme at work but because the works share price has been so low ive cancelled it the last 2 years and started again because of the newer share price deal.
i have no debt but no savings also.

my work is paying off next year, should be ok, but think it will be only 5 years left at VERY best with current employer(could be sooner).

I have no protection on my morgage also.

I was thinking of cancelling the £250 a month i pay for the discount share deal and paying this into my morgage (im allowed to do this with current deal) is this best or should i start saving??

jamesd

Missallaw, your first priority should be accumulating an emergency fund so that you can pay the bills if you lose your job.

For the discount share deal, now's generally a good time to be buying shares, an opportunity that happens only 3-4 times a lifetime at this level of price drop. But this does assume that you're buying a today's price, not some future price. If your price was set recently at the current low levels it's probably a good idea to continue paying.

You shouldn't generally be looking to pay off a cheap mortgage. Better to save and invest when the mortgage is cheap, then when the mortgage becomes more expensive switch savings to the mortgage, or when the markets are doing really well, sell some shares to help with the mortgage. Others will choose to hold the shares for longer times than the few years it takes to do these things, to pay off the whole mortgage later instead of gradually over the years.

savercat

I have just joined this thread. I have a flexible repayment mortgage of £75000. It was a tracker but since this rate came to an end I have left it as the fees seem too high to make remortgaging sensible.

I am having trouble with the maths. I appreciate that if I have tax free savings (ISA) at the same rate as the mortgage then it makes no difference if I pay off the mortgage and keep the savings - the net result is zero.

However, if I pay for example £20000 off my mortgage, taken from my savings, my monthly mortgage payments would then go down. I would therefore be better off each month. I could chose to spend this extra cash, or better still invest it overpaying on the mortgage (or save it). So surely paying off the mortgage makes sense?

Sorry if someone has already answered my question but there are a lot of posts to trawl through.

jamesd

savercat, if you have the money in savings the monthly interest from the savings is the comparable sum that you can use to spend as extra cash or invest or overpay the mortgage.

You choice is either of:
1. extra income and spare cash from the savings interest
2. reduced mortgage payment and spare cash from that reduced payment

Either of those could be bigger, it depends on which has the higher interest rate.

savercat

thanks jamesd, you are of course correct. Sometimes I go round in so many circles examining the permutations that I end up missing the obvious.

The challenge now is to see if I can get a better savings than mortgage rate - suppose I had better look into this now!