Pay off in full or partial?

Sunshine_and_Roses

I have been overpaying our mortgage for a few years now, I kept the payment at £500 per month when the interest rate started to drop, and have taken a few years off the loan term.

With the change in the BoE base rate, my mortgage is now 1.99% instead of 1.49%. I have had a letter advising this from my mortgage provider, saying they will keep the payment the same, though the standard payment would be £255 should the agreement not be in place. I assume from this that the original end date would be the same (May 2028) though the projected end date is Feb 2023.

The balance of our mortgage is £29000, and I am considering paying some or all of it off. Both myself and OH have Santander 123 accounts, and a joint account with £20000 which is 1.5% interest and cashback for £5 monthly fee. After the fees we get around £25 on each account in interest and bonuses. Also have some savings in ISAs which are getting 0.6% (instant access account, dont want to lock away for 2 years or more).

I am due to be made redundant next year, and looking at how to reduce bills etc. We have a 0% credit card which I used for a car purchase, balance of £4000 which is in a 123 account getting interest whilst paying minimum payments on the card.

Should I pay £10000 (for example) off the mortgage, as this is over the £20000 in 123 accounts not gaining interest? Then continue to overpay as normal? Or pay the whole lot off using ISAs which are not getting much interest?

I would appreciate any advice or thoughts you may have on this.

MM10

If the interest on the savings is less than the mortgage interest rate, I would consider paying off the mortgage in full.

I feel since you are so close to the end of your mortgage, the savings in interest are much smaller. If you don't pay off in full, you will still have monthly payments until it is paid off.

At the end of the day, you have one less thing to worry about.

Sunshine_and_Roses

The savings rate v interest rate is what I have seen on here before, and used that as a guide. The savings at 123 used to be 3% which was double the mortgage interest rate, then dropped to 1.5% which was the same as the mortgage.

Would you take money out of an ISA at 0.6%? I have not added to this for a few years due to the poor rate.

Nick_C

Is your mortgage with Santander? If so, I would recommend paying any excess in £1000 increments so you get £10 cash back each time. Phone the mortgage team, and they can arrange one off additional DDs

You should also look at some of the many options for getting more than 2% using current accounts and regular savers

Sunshine_and_Roses

Mortgage with HSBC, best rate I could get at the time without a fee. Will look into options with transfer fees back to Santander, keeping money in 123 account and paying £1000 a month to see how that works.

I have a regular savings account linked to 123 account at £200 a month for a year, at 5% interest. Also £3000 in a Tesco savings account at 3%.

Not sure if there are any more I can do?

dark^knight

If you can pay off the mortgage before you are made redundant, it will be one less thing to worry about.