Should I pay off my mortgage discussion

tymaloy

I intend to buy a house in the next few months. I also retire from my job Oct 2011 and will receive approx £80000 and I have £50000 savings, currently in savings bonds.

I own a property in Cambridge which i can borrow up to £135000 against.

I intend to spend approx £180000 on my next house but I am not sure whether to put all my cash assets against the Mortgage or save all, or a proportion of it.
Some advise would be appreciated.

Tymaloy

cherrymetal

Hi all,
I'm just coming to the end of the "Fee Period" of my lifetime tracker mortgage with Nationwide (Bank of England baserate + 0.39% - with a floor of 2% on the BoE baserate).

This means that I can overpay any amount at any time with no fees to pay.

What I don't understand is this, on the Nationwide internet banking site it gives me the option (under "Overpayment Preferences") to reduce term, reduce monthly payment, or leave as is until next natural mortgage payment change, when my monthly payment will be recalculated. This is all for payments of £500 or more.

It says for payments of less than £500 then it will recalculate the interest the next day (interest calculated daily) and says "you will save interest immediately".

What I want to do is reduce the mortgage term by overpaying a regular monthly amount, but that will be less than £500, I was thinking £150. Is this effectively what will happen? It doesn't seem clear.

I've used a calculator from another website that says if I overpay by £150 a month for the remaining term of my mortgage (14.5 years) that it will reduce the term to about 9.5 years (based on the current balance which is about £56.5k. Does this sound right? Because thats exactly what I'm after doing.

Many thanks in advance!

chris34

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I have an enquiry about repaying my mortgage early. I have been working in the Middle East for the last 4 years and have been saving my money over here whilst renting out my property in the UK. I should be in a position next July (2012) to pay off the whole of my mortgage. I have asked HSBC if I am able to do this and they have told be it is fine and there will be no early settlement fees. Doing this seems like a no-brainer to me, however I was told by a friend that it is sometimes not sensible to pay off your whole mortgage, however they could not specify as to why not.

I would be much appreciated if you could let me know your thoughts on this matter.

Kind Regards

Mr Chris Ratcliffe

cs0ghi

I have a part mortgauge some of which is to be repayed using a investment ISA. The ISA is now worth 2/3 of the target amount and I wondered if it was better to pay this off and start again in the ISA for the last 1/3 of the payment.

Do investment ISAs grow faster when they have a larger balance?

Regards,
Geoff.

AVENGINEER

At last, by overpaying I've almost paid off my mortgage, with just a month left to go. However, it occurred to me that it might be worth hanging on to it by dropping to the minimum payment, just a few pounds per month. This is because I may (or may not) wish to have some building work etc done in, say the next 2 - 5 years, and instinct tells me that my current lender would be the best place to derive funds for this. After all, they know my track record, value of my property etc. However, my IFA says it's better to completely pay off the mortgage and he will arrange any loan I may need when the time comes. I like and trust my IFA, but can his advice possibly be correct?

sprotson

We have approx £10000 to invest

Do we overpay mortgage which is at base rate, or should we invest in an ISA for example?

I always thought that when rates were low it made sense to overpay, having doubts.

atush

Yes, your money might 'make more' invested outside. But advice would be based on yur amt outstanding, term, and other investments.

Avengineer,

yes your mtg could have inbuilt borrowing already arranged. My base rate tracker says i can borrow 25K w/o extra fees or arrangements. you need to chekc the details. also, there are the Deeds, which if you don't want them at home can carry a fee to be stored which is free until you finish paying your mtg.

Some say deeds no longer need to be kept. But should your house be older or historic in any way I would.

Hurdler

I was messing about with the Overpayment calculator and was mulling over where I'd seen something on MSE about emergency funds... and that was here.

I've just started my own MFW thread and will be starting a new job in August having taken Voluntary Redundancy (I left my previous job in July).

I think, because my ultimate plan is to try and have a career change from IT to Journalism (which pays WAYYYYYY less), despite the fact I wanted to have a loft extension, I really don't NEED one just now... so I think that I would be better putting that lump sum (which is my VR plus still some money left over from an inheritance and some cashed in shares) into the mortgage.
As it is I have a Current Reserve account against the mortgage which means I can always draw on it if needed, although I want to follow Martin's advice and squirrel away 6 months emergency fund in a higher rate, easy access account (most probably not even at my bank).

Being single and walking away from a well paid job (but one that was ultimately making me miserable) was one of the scariest things I have ever done, and I am exceptionally lucky to have been aggressively recruited to a similar role within 6 weeks. It taught me one very important thing... the only person who is going to be paying my mortgage for the time being is ME. So I need to make that as easy on myself as possible within the next couple of years in this role.

A question, though, to the knowledgable massive.
Last night I was too dopey to take into account a couple of ISAs I have (my bank brings out a more favourable issue, year on year so I keep the old ones ticking along and invest in a new one).
Does it make more sense to group those together as part of the emergency fund (I'd say they will just about cover 2-3 months)?? Or keep them separate as another buffer or something to cash in and use as another lump sum towards the mortgage at some stage?

Anyway... looking forward now to really advancing down the line of being a MFW from October.

Sepa74

Hi Hurdler, don't forget your money is your money - you use it for whatever you want to use it for.

The savings in various ISAs are there for whatever you want to use it for - an emergency fund, for instance, or whatever else you may have it earmarked for.

If the ISAs are earning significantly lower than your mortgage you may even decide to close them and pay them to your mortgage as the saving in interest will be greater than the interest you earn on them, if that makes sense.

Don't forget, an emergency fund is just that - for emergencies. Emergencies don't come along that often, so if you have existing savings it makes sense to build them up slowly. I tend to see mine as a form of self-insurance - it's quite large, but not only does it cover me if I lose my job, I will also pay any large vet bills out of it (saving me for pet insurance) and also if my house gets broken into or burned down (saving me contents insurance - I live alone and don't have many replaceable contents (a lot of my stuff couldn't be replaced anyway as it's sentimental), while the buildings insurance is covered by the freeholder, not me!).

That might seem risky, but what are the odds of all three things (losing my job, cats getting very sick and house contents being lost) all at once? If one, or even two of these things happen, I will use my emergency fund and then spend some time building it up again.

Does that make sense? I hope so!

Hurdler

Hi Sepa - I replied to you in my MFW thread... but yes.. I totally see what you're saying. I think once I get the first couple of salaries under my belt, and the recalc (as I am working off my current figure which hasn't taken into account the overpayments over this year, I'm told)... then I can sit and look objectively.