Should I pay off my mortgage with my savings? What would you do??

moneymark

Hi there,

Over the past 5 years or so I have managed to save up £300k and is currently doing very little earning about 1.75%

I have an interest only mortgage of £257k on a varible rate. I have decided I am going to fix this to a repayment at a lower rate and pay £50k off.

Big question is, would you pay do the same or pay more off? One half of me says I should the keep the savings for my future, the other tells me it would be better to have no mortgage! What would you do???

Thanks

MM

Wh05apk

Why not go for an offset mortgage - possibly on an interest only basis?


You would then have no monthly repayments, but the funds would be there if you ever needed them again in the future.

moneymark

I'd love to get an offset but because of my self employment my advisor has told me no deals are available.

[Deleted User]

You could purchase another property, rent it out, then let the rental payments chip off the debt on your interest only mortgage.

If you're ever stuck for money, you've always got the ability to sell the other house. £300k in the bank sounds like money going to waste that would be better say in an appreciating asset

getmore4less

You might need to look at getting a second opinion on the offset.

You need to review your investment strategy.

do you have other investments yet?

have you been maxing out your ISAs(stocks and shares)

Will you continue to be generating £5kpm.

Fixing will limit overpayments so may not be a sensible option(unless you reduce the term to up the payment).

getmore4less

ringo_24601 wrote: »

You could purchase another property, rent it out, then let the rental payments chip off the debt on your interest only mortgage.

If you're ever stuck for money, you've always got the ability to sell the other house. £300k in the bank sounds like money going to waste that would be better say in an appreciating asset

less min 40% tax based on the numbers OP is suggesting their income is

pcgtron

Personally, I'd pay off my mortgage. Living without that payment every month would be lovely, and then you can start to build up the savings pots again with the money saved on the mortgage.

PheoUK

Can't really answer fully until you mention what likely interest rate you're going to get on the mortgage.

If you are paying >1.75% on the mortgage, and you can't shift that savings fund into a location which has a higher return than the mortgage (and an acceptable level of risk), then I personally would pay off the mortgage.

Thrugelmir

Why are you accumulating cash?

moneymark

Thrugelmir wrote: »

Why are you accumulating cash?

I've just been saving money from my business for a rainy day. I don't really know what is best to do with it - I'm a little overwhelmed with the options out there and don't know what to do for the best. I worry a FA will just tell me to invest in stocks and shares.

PheoUK wrote: »

Can't really answer fully until you mention what likely interest rate you're going to get on the mortgage.

If you are paying >1.75% on the mortgage, and you can't shift that savings fund into a location which has a higher return than the mortgage (and an acceptable level of risk), then I personally would pay off the mortgage.

I have been offered 2.24% on a 2 year or 3.09% on a 4year both fixed re-payment.

getmore4less

moneymark wrote: »

I've just been saving money from my business for a rainy day. I don't really know what is best to do with it - I'm a little overwhelmed with the options out there and don't know what to do for the best. I worry a FA will just tell me to invest in stocks and shares.

potential mortgage free,
generating £5kpm(+capital part of the mortgge payments) free cash flow,
investing you in the business(which seems to be doing well)

You need to diversify somewhere

or reinvest back into the business( is it scalable?).

How old?
Are you maxing out pension to reduce the current tax burden.
maxing out ISA to generate future tax free income

You may also want to look at IHT planning

Retirement age planning.