Remortgage on longer term?

Thrugelmir

guymo wrote: »

… but mortgage overpayments benefit from compounding too. Surely the question of whether to smash mortgage debt or make investments is simply one of interest rates and risk tolerance?

Agree totally. Mortgage overpayments carry zero risk. While "investments" also carry a risk of capital loss. Too often investors buy on yield alone.

Yorkie1

guymo wrote: »

… but mortgage overpayments benefit from compounding too. Surely the question of whether to smash mortgage debt or make investments is simply one of interest rates and risk tolerance?

True.

But the mortgage will be paid off in due course irrespective of any overpayments. If you don't save towards retirement, you don't get that income in due course.

dimbo61

you are on a fixed deal until june 2014 so cannot change deal until then without paying ERC
You want to go onto a Tracker deal just as the BOE and government talk about Interest rate rises!!!
WARNING Shares can go UP and DOWN!!!
even ISA stocks and shares can do this.
You are paying 3.99% and I am sure with your LTV you can get a 5 year fix at 3% or less fixed for another 5 years security.
Know idea of you age or retirement plans but spreading the mortgage back over 25 years will add thousands of pounds in interest

guymo

Yorkie1 wrote: »

But the mortgage will be paid off in due course irrespective of any overpayments. If you don't save towards retirement, you don't get that income in due course.

I think this is misleading.

If you overpay the mortgage and clear the debt quickly, once the mortgage is gone it frees up additional money each month that can be put into retirement savings.

For a given sum that can be used either to repay the mortgage or to contribute to savings, there is no magic about putting the funds in savings over putting it in the mortgage. If the savings and mortgage have the same interest rate, you can divide the money up between the two as you like and the net result is the same.

In practice, for e.g. an equities based retirement fund, you might expect a better rate of interest on the savings, which would tend to suggest putting more in savings and less in the mortgage; but that better rate comes with a higher risk. In the case of pension savings there may also be tax advantages which increase the effective return.

In the OP's case, the proposal is essentially to borrow money against the mortgage (not paying money off = borrowing it) in order to fund a retirement plan. OP needs to figure out if the expected return outweighs the interest paid on the mortgage by enough to compensate for the risk taken.

bownyboy

Thought I'd update this old thread with that I finally ended up doing.

I secured a BOE+1.99 lifetime tracker with Santander (no product fee as retainer product) which started in June 2014. My payments reduced down to £675 with 15 years remaining. Interest reduced by £150 per month.

Am continuing to overpay by £500 so it should be reduced by December 2021 approximately.

I also opened a S&S ISA with Vangard Life Strategy 60 and have been increasing my monthly payments since October 2013 so they are now at maximum £1250 per month.

Also moved my old stakeholder pension into new Aegon personal pension and halved the AMC to 0.5%. Now paying gross £2000 per month into that.

For the first time I feel in control and comfortable that I have a plan in place. Mortgage will be paid off in 7.5 years and the plan is to build up ISAs and Pension to enable early retirement at age 50.

Phew. Its been a busy year.

Thanks everyone for your input.