Should I pay off my mortgage discussion

getmore4less

Interesting article - but how about overpaying a mortgage compared to putting money into a pension scheme? Which one should take priority, for a self-employed person?

Depends on too many details to say

Variable cash flow may make an offset product suitable.
Ongoing surplus may make investing in ISA/pension worth looking at.
Also depends on the TAX position now and in the future.

Also think "retirement income" not just pensions.

juliettes_2

Hi
Great article and very timely for us.

Thought you'd like to know we've found a great loophole, to get around the penalties for overpayment.

We have a Nationwide mortgage and are allowed to overpay by £500 per month only. BUT, we've now found out that we can change our mortgage term (as often as we like) with no penalties at all! So, if we wanted to overpay by more per month, we can just shorten the term down to, say 15 years instead of 25. This increases our monthly payment, increases the amount of capital we're paying off, and significantly decreases the total amount of interest we have to pay off.
And then, if we ever want to reduce our payments back down again, we can lengthen the term again. No penalties for doing so.

:jFantastic!

Don't know if all mortgage lenders allow this, but worth investigating if you wished you could overpay more...

Jacques_Cartier

muggles wrote: »

We currently repay about £6.00 a month, which works out to be better value than our local solicitor's safe. Worth thinking about.

Check out if the Land Registry is holding the electronic copy (90% of all deeds are now held like that). If so, they have the "master copy" and your paper ones are food for the shredder. You would save another £6.00 a month!

996_fan

I've read the discussion on repaying your mortgage rather than saving, I understand the principle and I can see the potential benefit. Trouble is, I have a mental block on one aspect which I can't figure out. I'm sure I'm being daft, so if someone can give me a noddy explanation then I'd be really grateful.

I'm usually fairly good with numbers, but I'm stuck on this! - here's an example.

If you were saving the money, you pay in 10,000 into a savings account. Get interest every month at some rate, pay tax on it, and that's your income from the savings. In 25 years, you've still got your 10K capital. I get that bit.

Or you pay of 10,000 on your mortgage (assuming no penalities etc). You then keep the term of the mortgage the same, so monthly repayments drop. The difference between original and new monthly payments is your income. I accept that it could be a lot higher that you could earn with savings. I get that bit, but ....................
The question is, after 25 years of lower mortgage repayments, remebering you kept your original term, you've had your monthly income, but where's your 10K?

I can't get my head round it. In both cases you own your house after 25 years, so where's your capital if you repaid some of your mortgage?

If some smart person can tell me the flaw in my logic then please do!
Thanks
Richard

mrs_deadline

I think the 10K plus interest must lurk in the difference between the higher and lower payments over the 25 years (or 300 months).

Gorgeous_George

I think there is a balance to be had.

Mortgages are usually the cheapest debts that you can have. I think holidays are investments in your happiness. I couldn't afford to holiday as much as I would have liked when I first bought a house. Nowadays, things are easier and I holiday a lot. Sure, I could concentrate on paying my mortgage off instead but I don't want to be a super rich pensioner.

Who knows what life will bring? Find your balance.



GG

LONDON0929

I HAVE A OFFSET MORTGAGE AT 5.5% I ASLO HAVE SAVING IN ISA WOULD IT BE MORE COST EFFECTIVE TO OFFSET ALL MY SAVING INTO MY OFFSET

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

LONDON0929

i have a offset motrgage 5.5% using some of my saving aginst this i also a have cash isa would it be more cost effective to use all my saving against the mortgage offset.

getmore4less

996_fan wrote: »

I have a mental block on one aspect which I can't figure out. - here's an example.

If you were saving the money, you pay in 10,000 into a savings account. Get interest every month at some rate, pay tax on it, and that's your income from the savings. In 25 years, you've still got your 10K capital. I get that bit.

Or you pay of 10,000 on your mortgage (assuming no penalities etc). You then keep the term of the mortgage the same, so monthly repayments drop. The difference between original and new monthly payments is your income. I accept that it could be a lot higher that you could earn with savings. I get that bit, but ....................
The question is, after 25 years of lower mortgage repayments, remebering you kept your original term, you've had your monthly income, but where's your 10K?

I can't get my head round it. In both cases you own your house after 25 years, so where's your capital if you repaid some of your mortgage?

If some smart person can tell me the flaw in my logic then please do!
Thanks
Richard

Same as a previous poster you need to do like for like, so draw the same income from both situations, do a worked example saving the difference.

The subtle bit is that the repayment mortgage reduces by the interest on £10k AND a bit to take acount that the mortgage is £10k less.

LONDON0929

i see what you mean .should i put all my money into my offset mortgage