Cash everything in and pay mortgage off?

Agg

I’d value people’s opinions on what I am thinking of doing and whether it is the right thing to do.

I currently owe £56K on my repayment mortgage, which has 14 years left to run. I am paying around £500 a month at a tracker rate 0.33% above the BoE rate.

I have around £6K in savings accounts, (ISA and non-ISA), around £6K in direct shares and £2K in Premium Bonds. I also have £42K in equity PEP’s and ISA’s that I have had since 1998. I started contributing to these without any great intent as to what to do with them and have never withdrawn anything from them.

I am now considering cashing in all of the above and using the money to completely pay off my mortgage.

The reasons I think I should do this are:

• I would be £500 per month better off and could invest a good part of that to build my investments back up.
• I still can’t think of anything better to spend my PEP and ISA money on.
• I’d like to lower my monthly outgoings as much as possible just in case I loose my job. (I work in sales and you never know what’s round the corner)
• I am only 41 and still work, so have a few more years ahead of me to build savings back up again.

The reasons I can think of for not doing it are:

• I would be completely wiping out my “nest egg”.
• My mortgage rate is not too bad at the moment.

Do people think I should cash everything in, become mortgage free and start saving again from scratch?

Cheers

Agg

ailuro2

You need to protect the tax free investments, work out what rate of interest the others are giving you- and decide what level of repayment you would go for- assuming your mortgage provider lets you- have a read through this article

http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

as you are still tied in you may be wiser overpaying what you can off the mortgage(normally restricted to 10% a year) and finding a better home for the lesser performing savings. I agree it makes no sense to pay a 3% fee just to pay a lump off your mortgage, as long as your money is working hard elsewhere in preparation for you losing those %age restrictions.

hth.

keeperbear

Well, that is exactly what I did. I cashed in all my ISAs etc and paid off my mortgage. Best thing I have ever done. The feeling of having your own deeds is liberating, and much better than an extra 0.25%-0.35% on my savings (over the mortgage rate). Since paying off my mortgage, I have found it easy to save and have quickly replaced alot of my savings. Payday is now a joy as I simply switch my 'mortgage payment' into my online savings.

Dithering_Dad

With such a large amount of money invested I would seek professional financial advice before you do anything rash. You have an awful lot of money invested tax free and if you cash that in, you'll never get that tax free status back (except at 7k per year in new ISAs). If you are not immediately about to lose your job then you should keep the Peps and ISAs and examine your investments to see if you can get better returns and perhaps just make overpayments on your mortgage in the future with any spare cash you may have.

Simply cashing everything in to pay off a mortgage is financial madness (except for the premium bonds which give rubbish returns) unless you have a very good reason for doing so, such as long term sickness or have lost your job. If you analyse your investment returns, you may find that investing them in better funds/shares will be netting you much more per month than your current mortgage payments.

Kaz2904

I have to agree with DD here. If you are desperate to get rid of your mortgage then you could just overpay it as much as you are able to. If the worst happens then you can always cash it all in then but don't do it if nothing has happened yet.
Even if you don't pay your mortgage off early, you are 41 now and it will be gone by the time you are 55. That gives you 5-10 years to expand on your investments before retirement.

Agg

Thanks for your thoughts.

I must admit, I never thought about getting professional advice about it. I always feel that these people have some sort of agenda and see you as someone with a big bag of money that they can persuade to part with to buy whatever it is that they are selling, i.e. they have a narrow focus rather than a holistic one.

I always thought I should build up my savings & investments until they amounted to a little more than my mortgage and then pay off my mortgage. I guess what you are saying DD is that, with this amount of capital it would be better to use the money to make more money and I should speak to someone who knows more about it than me to work out how to do this?!?!

Cheers

Agg

Martinslovechild

What about using some of your savings to reduce the mortgage to half its current level, £28K.

This has the benefit of reducing your outstanding mortgage term substantially while not entirely eroding your savings.

do_it_today!

Hi :hello: if it were me i would cash in the bonds to put in mortgage - get a money pig and make overpayments were possible you may find you are able to make a bigger impact then you first thought. like ops mentioned do get some professional advice. I had a session with (dont laugh) wise financial monkey company - they dont try and sell you investments but look at what your goals and ambitions are and the best way forward- quite good I have also had conventional IFA input also.... the experience hasnt been that great but I am willing to try again.

Good luck

oldenufftoknowbetter

I always find these threads interesting reading.........Okay the savings/investments are earning and it may be nice to have them BUT a mortgage is a pain in the neck.

Having just paid our mortgage off it is a great feeling to think that you can save some or all of the money each month rather than having to pay the bank/building society a set amount with no choice. At 41 there is still time to save rather than bearing the mortgage for x amount of years.

dreams_R_free

Hi Agg

This is the first time I've ventured into the Mortgage area, but your thread title intrigued me. I usually haunt the DFW board!

I had a similar predicament although with other big debts not a mortgage to repay but the principle is the same I suppose. I have £9000 in ISAs and had £29000 in Premium Bonds despite having an equal amount of debt:eek: . The Bonds were bought with money left to me on the death of a relative and I just couldn't use the money to pay off debts and let it just 'disappear'. There was always the hope of a prize too and I did keep winning the odd £50/£100 most months but certainly not enough to make them a profitable concern.

I came to realise that the relative who left me this money had spent his life scrimping and saving in order to have something to leave to the family. My adult life has been a constant search for ways to make enough to pay my bills and I managed to just about keep on top of it through a completely pauper-type way of living. Every month was a worry about how I was going to survive, yet £38000 was safely tucked up in savings. Mad or what????

I decided that I was going to start living, not in a spendthrift way because that would never be my style:rotfl: , but make sure I didn't leave a big 'estate' after a stressful penny-pinching existence. So I have left the ISAs intact and have cashed in the Premium Bonds. The relief of using these to clear 95% of my debts has been the most joyful experience. The outstanding debts are easily manageable now and what I was throwing at the repayments before can now be saved in an interest-making account. I feel good about that as the money will not have been 'squandered'. Another 'plus' is that my stress-levels have plummeted and my blood-pressure is now 'normal'.

Sorry to hi-jack the thread but it felt my experience seemed fairly relevant. I empathise with your so much as I know what that sort of problem is like.

The very best of luck to you, whatever you decide to do:beer:
Imp

Dithering_Dad

Agg wrote: »

I must admit, I never thought about getting professional advice about it. I always feel that these people have some sort of agenda and see you as someone with a big bag of money that they can persuade to part with to buy whatever it is that they are selling, i.e. they have a narrow focus rather than a holistic one.

If you go to see an Independant Financial Adviser and pay a set fee for his/her advice, then they are not getting their money from commission and so you should get independant advice. Tell them from the get-go that you're not going to buy any products with them, you just want advice.

Agg wrote: »

I always thought I should build up my savings & investments until they amounted to a little more than my mortgage and then pay off my mortgage. I guess what you are saying DD is that, with this amount of capital it would be better to use the money to make more money and I should speak to someone who knows more about it than me to work out how to do this?!?!

Yep. You have such a substantial portfolio of investments that you should be making far more with them than you are spending on your mortgage. The fund my pension is invested in made over 20% last year, whereas my mortgage cost me 6%.

This may seem odd advice from someone who started the "Pay off your mortgage in three years" thread, but while this strategy is right for me (my only investments were in my pension, which is untouchable and a crappy endowment that I cashed in), it is not right for everyone. If I had as much as you invested in ISA's I'd leave them well alone and just cash in my poorer investments (such as the premium bonds) to pay onto the mortgage and start doing regular overpayments. It may take you (say) a further 5 years to pay off your mortgage. but by then you will still have pots of cash in your isa's to help provide your retirement income AND have your mortgage paid off.