To fix or not to fix....

I_am_sparticus

Morning all

Newbie here

Ok so we have
House value £260K
Mortgage £151K
14 Years left to run on interest only

We could almost clear the mortgage if we wanted to but that would empty our savings pot. Cant get Offset as we only have low wages ( through choice).

Locked in with Halifax on 3.5% until Feb or a ERC of £1800
But could switch to 1.99% 5 years which drops £440 a month to £250

Would you leave it till Feb and try and fix then but need the crystal ball for the rates then available. Saves £11K over the 5 Years
Or
Pay now and have the security saves £9.5K over the 5 years.

By the time the Mortgage expires we will have money come our way to clear it with plenty left over

Im minded to go with the fix now

Over to you guys....

Cheers

Boredatwrork

When I went for a new deal with Halifax, they allowed me to swop over 3 months early, I would give them a call and see if thats possible, that could bring your date back to december. Failing that I believe they do let you lock in a new deal 3 months in advance if you are worrying that the dates would shift.

Personally pay as much off leaving yourself aound 10k emergency funds in savings, then look for the best deal from there. Even if you dont want to do that at least consider paying the amount off to get you onto the 60% LTV which will get you onto the best interest rates. for when you move onto the next deal.
But is the money really doing better elsewhere, most probably not.

getmore4less

We could almost clear the mortgage if we wanted to but that would empty our savings pot.

Whats that money doing now?
Is paying down the mortgage a better use of it.

clairebeth

I would clear it. You could either pay the £1800 erc now, or wait until February, but by February you will have paid £3000 in interest, so you may as well do it now. Keep aside 3 to 6 months worth of expenses and then put the £440 a month that you're no longer paying in interest into savings/pension.

I_am_sparticus

Ta all

@Boredatwork - Yes its actually April so the 3 months back is Feb
@getmoreforless - Bulk in PBonds and the sad XL sheet shows 1.3% per annum. Shares 2% PA and ISAs. So its costs us 1.99-1.3% = 0.69% £89 in real terms to have in in real money than in Bricks
@clairebeth - Yes fixing now actually makes sense on the monthly saving we would make.

The general feel is to just pay off the mortgage but we are having a mental block with this. Effectivly we have our own offset mortgage just keeping the money in our own pots albeit we incur a cost of £89 to have this.
Pay off the Mortgage and everything we have is tied up.
Or are we just being scrooge like and prefer to look at zeros in teh bank?

Ta

Boredatwrork

The general feel is to just pay off the mortgage but we are having a mental block with this

Which feels better:

1 Money in the bank and a slow burning debt and interest every month that could go up or down to think about for over a decade
2 The feeling that I don't owe anyone anything, have saved a bundle in interest rates, with more money coming in each month saving for retirement.

Total no brainer for me.

getmore4less

If you are forecasting big input of funds in the future it does not have to be an all or nothing.

do a cashflow forecast and see how far you can reduce the pot now.

You have to pay it off sooner or later

May want to keep some back for loss of income or a project, but how realisic is a project costing £100k+

I_am_sparticus

Now even more confused

Ok, Right looking at it this way

The recession hits in a few years as per its usual 10-15 year cycle and house values drop
1) We have paid off the mortgage and our £260 K house is now worth erm £200K but no monthly payments
2) Leave cash in the bank, still worth £151K and the equity has gone down to £50K but we are paying a mortgage % on £151K. But could just pay it off if the 15% days returned (12.5% on savings though hmm)

Head hurts thinking about it. Have always considered money under the mattress is better because it cant reduce apart from inflation. Brick and mortar can reduce wildly

We are in the construction industry and there is a slight wobble going on, early days but the signs are there

Wine I think is the answer

snickpan

Mind you, money under the mattress will lose you money. The basket of food scenario: a year from now, a basket of food may have gone up by 3%, but your mattress stash won't have.

snickpan

I'm going with your 'wine' scenario!

getmore4less

The value of your house is not relevant to your net cash position.