Pay chunk off repayment or interest ?

sqwiffy

Hi,

Never posted before so hope this is in the right place ?

Mortgage left of £26,000 endowment, and £20,000 repayment, interest rate of 1.49% with just under 4 years left. We changed to part repayment and made arrangements so that we wouldn't be short at the end, so all in place to clear the endowment part at end. We have ISA's of about £28,000, on about 1% but haven't used this years allowance. We also have about £8,000 in easy access savings earning peanuts.

I checked with mortgage company and there are no penalties for paying early. Should we pay off the endowment or repayment part and then overpay on the other? Or possibly then pay more into our pension ? We are in our late 50's with pensions.

Any thoughts? Thanks.

amnblog

Ask your lender the implications of each step. Only they will know the detail behind your arrangements.

TrickyDicky101

Do you actually have an endowment plan in place which you pay monthly premiums to?

If there are no early repayment penalties, and both parts of the mortgage are charged at the same rate of interest, then there is no economic difference between paying the same amount off either mortgage.

sqwiffy

Yes, we do have an endowment plan in place to which we make monthly payments as well as our mortgage payments.

sqwiffy

Should have come back to you. We paid of £26000 from the endowment part and have continued to pay the same amount as before.

ViolaLass

Couldn't you get more than 1.5% on your savings?

sqwiffy

1.49% is the mortgage rate.

ViolaLass

sqwiffy wrote: »

1.49% is the mortgage rate.

So you said. If you could get more than that on your savings (after tax) then it would have made more financial sense to save the money than overpay the mortgage.

sqwiffy

Ahh, I see what you mean now. I did think about that but the money was in ISA's and savings accounts earning less than that. The mortgage finishes in 2018 so we thought we might be able to pay it off earlier and save the interest.