Should I pay off my mortgage discussion

The_Only_Homer_Simpson_UK

Hi all
have tried to use the various calculators but cannot seem to get the right details
We have an endowment mortgage ( paying out 2010 and 2012 and will cover mortgage)
There is approx 17K left outstanding
interest rate is currently at 7.31% variable standard life
monthly payment is £95.00 however am paying in £200 per month ( overpayment of £105 per month)
Mortgage term is up in 2012
have savings in ISAs and non isa accounts

Should I pay off or continue as now ?
Any guidance appreciated
Thanks in anticipation

jamesd

stphnstevey, also worth looking to see how short they will let you make the term to increase the monthly payments. It may well be possible to set the term to the fixed period or shorter and that can substantially increase the amount of overpayment you can make. A non-mortgage loan added to that, intended to last only until the property is sold, could help to increase the amount you could pay off the price. Another option is to rent it out rather than selling it.

sghkey, stocks and shares ISA with investments. Invest until you have a large pot and can pay the mortgage than switch 10% a year into the mortgage, so you don't lose the whole investment pot. The 10% a year part smoothes out stock market variations so you're not vulnerable to a temporary downturn. If you can't put in 7000 a year (for each of you if married) switching to interest only can increase the amount you can invest; add the difference between interest only and repayment to the investment amount. You're likely to end up with a considerable surplus. You can add up to your annual income into the pension each year so deferring that is fine so long as you're investing in some way. If you aren't a higher rate tax payer yet and may be in the future, definitely delay the pension until you are, because then you can get higher rate relief than instead of basic rate relief now. Just don't delay the investing part.

996_fan, the 10,000 became equity when you paid it off the mortgage. It's there in the value of your home. If you want to recover it you need to keep on making the mortgage payments for a bit longer, but into a savings account instead of the repaid mortgage.

LONDON0929, no, you can get a higher cash ISA rate than 5.5%, so move the ISA to a high paying ISA account instead of to your offset account. Also remember that the ISA allowance is an annual limit so it has value after the mortgage ends. It's worth considering lenders like Intelligent Finance that let you offset with a cash ISA account when you remortgage, since that lets you offset but keep accumulating the ISA allowance each year. Once the offset reaches the outstanding mortgage balance you could gradually transfer the ISA money out to other ISA accounts until finally you have no mortgage balance and nothing in the mortgage offset ISA account, all of the savings in an external ISA. Then you could consider using the new option that comes in next year to switch cash ISA to stocks and shares ISA and kick start your investment pot for retirement or early retirement flexibility.

The Only Homer Simpson UK, please start a discussion in the mortgages section. The ISA part is easy: keep in ISA until you find out what mortgage rate you can get with a remortgage. The mortgage you can consider remortgaging since there's no need to pay 7.31% unless you have poor credit. We'll need to know what the endowments are invested in, the company, any other investment options, the latest value information before it's possible to make comments on the endowment. Will also need to know how much in other savings and how that is saved or invested - using that to overpay may well make sense regardless of what else happens. Too much to do for a discussion in this general topic.

deefadog

I think the main question to this is can you comfatablly afford your mortgage each month, if yes the savings is the ways to go if it's a higher rate than your mortgage.

Persoanlly, we have currently stretched our selves financially and have a house that will last us a life time, so the sooner we pay off the more we can start enjoying our selves, i.e having £800 a month spare to do what we want with. Gpoint to bust out guts the next 4 years to overpay and and hopefullt my lump some investment will have mature ed enough so we are mortgage free - March 2011.

BTW is there an xl spread sheet on this?

Cheers

stphnstevey

996_fan wrote: »

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

Can you alter the term of the mortgage on a Nationwide fixed rate as well?

If so, would the extra payments not be seen as overpayments and hence incur a penalty?

I have interest only mortgages (yes, I know I need to pay the capital at some stage!). Altering the term would not have an effect here? I would need to switch to repayment?

turbo25

Interesting discussion. It occured to me that putting savings into an offset mortgage might enable people who would normally be unable to claim some benefits such as family credit to do so. In other words any grants, bursaries, employment benefit, etc are means tested on your income and savings, then rather than having say 30k in a savings account, if you were to put this into an offset mortgage, you would be eligble for benefits that otherwise you may not get because of savings? Because you would not have to show the 30k savings in the assesement form?

I hope this makes sense.

---

A man who buys a a tool but never uses it when needed to do a job is a fool. Such is the case with money.

beecheemink

Our mortgage is due to be cleared in June,2010. There is only about 10000 left to pay. We have the funds to clear it as I am being made redundant. We have already knocked 7 year of by paying extra over the last couple of years. Should we go ahead with this and will it be worth it, Thanx

chelly1972

hi everyone,new to the posting bit but not the site it's wicked,
anyway have bit of problem need some advice,i have a fidelity isa account paid into for 3years now,so have about£3000 first of all not sure if i can take it all out in one go, second if i can am i better off paying some of my morgage off as im interest only which is £94000 or my credit card debt of £2200 please someone help getting totally confused also really sorry if posted in wrong place.

christhesparky_2

pay off which ever has the highest interest rate, pointless paying off the mortgage if the cc has a high interest rate

jamesd

chelly1972, what is or are the investments in the Fidelity ISA account? It's very likely that you can take it all out or just 2200 out if you like.

It's unlikely that you're going to be better off taking money out of an investment in a Fidelity ISA to pay off some of the mortgage because investments usually grow at a higher rate than the mortgage interest rate over the long term. Using the money for the credit card might well be a good idea. What's the interest rate on the credit card?

juliettes_2

stphnstevey wrote: »

Can you alter the term of the mortgage on a Nationwide fixed rate as well?

If so, would the extra payments not be seen as overpayments and hence incur a penalty?

I have interest only mortgages (yes, I know I need to pay the capital at some stage!). Altering the term would not have an effect here? I would need to switch to repayment?

Yes, we have a 2-year fixed rate mortgage with Nationwide. You can definitely alter the term, and it's not seen as an overpayment. We've done it and it works . It was a Nationwide mortgage adviser who told us about it but they don't advertise it anywhere.