Advice re mortgage redemption needed

Andypandyboy

My sister called round today to ask my advice re mortgage redemption, and I wasn't really able to help her. I am hoping someone on here may be able to assist.

The situation is that she has an endowment which has just matured and the cash is sitting in the bank waiting to be paid off her mortgage.

She has two mortgage accounts one with 6 months left to run and £25.500 outstanding, all interest only. Monthly payment is £75

The other is for £27,000 with £3000 of that being a repayment mortgage, and it has 13 months left to run. Monthly payment is £440

She has a total of £35,000 to pay off the two accounts, but which account should she completely pay off and why?

The balance outstanding will be approx £18,000 less payments made from now till end of mortgage term so around £13,000 at that point if she continues with current payment levels thrown at the one account still outstanding) which she has been told she can either pay off from savings (which she has the funds to do) or extend the term and change it to a repayment mortgage.

Nationwide say they can't advise which account it would be best to pay off completely.

Is there any advantage to paying one off over the other? Advice welcome.

Thanks.

libf

Rates on the mortgage accounts?

Surely if there's 6 months on the interest only then it would be easiest to just pay that off instead of re-mortgaging?

Andypandyboy

Both on SVR.

It won't be a re mortgage just an extension of the term and because they insist on repayment now there will be no fees attached apparently.

Thrugelmir

Does your mother wish to clear the mortgage from savings?

Andypandyboy

My sister, she hasn't decided yet, she could, but she is in a well paid job and is only 51 so she may decide to carry on paying on a repayment basis and clear the remaing £13,000 by making large monthly overpayments rather than using her capital. If she paid what she pays now on the £13,000 then she would clear it in under 2 years according to Nationwide.

Whichever one she pays off completely the balance outstanding will be the same, but she just wondered if it was better to pay one over the other and I couldn't advise her about that.

Thrugelmir

Really down to personal choice. Clearing the account with 6 months left gives a larger window of opportunity to pay the balance down, prior to obtaining a new product.

dimbo61

" Both on SVR "
Now Nationwide have a BMR which is 2.5% and an SMR of 3.99% so big difference.
What rate of Interest is she earning at the Bank? Before TAX
Has she got any Emergency savings ?
I would pay off the IO part and some of the repayment part IF no ERC,s to pay and then overpay what she can afford each month

Andypandyboy

The docs she showed me said 2.5%. I think she has a substantial amount in savings but I don't know where it is invested or at what rate.

No charges for overpayment or penalty for redemption.

cloudydays

Wasn't the endowment linked to the mortgage? The reason I ask is because I had two endowment policies and when the first one matured it was paid direct to the mortgage provider and as there was a shortfall I paid the balance from savings to become mortgage free. A few years later when the second endowment matured I had to prove that my mortgage was fully paid up before they paid the cash to me.

If the building society are insisting a mortgage is repaid now before the end of it's term would suggest that the endowment was linked to the mortgage. Seems strange that the endowment payout was paid directly to your sister.

getmore4less

She has two mortgage accounts one with 6 months left to run and £25.500 outstanding, all interest only. Monthly payment is £75


Something funny there if SVR it should 2.5%(£54pm) or 3.99%(£85pm)

The other is for £27,000 with £3000 of that being a repayment mortgage, and it has 13 months left to run. Monthly payment is £440

Again 2.5%(£300pm) or 3.99%(£335pm)



If it were me, and the savings were not making more than the mortgage.

Pay off the 6 month and use the rest to reduce the 2nd then make payments to have it paid of in the 13months


Then start saving again.

why keep the mortgage?

Andypandyboy

cloudydays wrote: »

Wasn't the endowment linked to the mortgage? The reason I ask is because I had two endowment policies and when the first one matured it was paid direct to the mortgage provider and as there was a shortfall I paid the balance from savings to become mortgage free. A few years later when the second endowment matured I had to prove that my mortgage was fully paid up before they paid the cash to me.

If the building society are insisting a mortgage is repaid now before the end of it's term would suggest that the endowment was linked to the mortgage. Seems strange that the endowment payout was paid directly to your sister.

The endowments weren't tied to the mortgage, and the mortgage company aren't insisting on her paying it off now. The endowments were to repay the mortgage but not assigned to the mortgage company, so the monies were paid straight o my sister.

She has been in this afternoon and repaid in full the one which has 13 months to run freeing up over £500 pcm which she will now add onto the £175 (inc current overpayment) that she pays on the other.

As she also paid c£9,500 off the other account this will give her six months overpaying at c£700 pcm before that term ends which will mean that the balance will be around £13,000 in Feb, at that point she has been quoted a monthly figure of £231 if the term is extended to 5 years on repayment terms but if she then carries on paying the £700 it will be repaid in under 2 years.

Nationwide said there was no advantage to repaying one over the other, but doing it this way means she has more flexibility with payments.