paying off the mortgage early

koolrambo

hi there,
i have a BMR mortgage with Nationwide @2.50% that as 11YRS 1MTH left on it but i like to get that down to 5 years or less, i am paying £458.68 per mouth and i can afford to pay about £400 pound a mouth more so my question is ,is it better to pay the extra £400 on top of my mortgage or save the money up and pay a lump sum at the end of 60 mouths

dunstonh

is it better to pay the extra £400 on top of my mortgage or save the money up and pay a lump sum at the end of 60 mouths

Or is it better to pay into your pension?

AndyPoll

If you can save or invest the money at a better rate than 2.5% then do that. If you aren't confident that any investment will return that amount, then overpay the mortgage.

A cash account won't get you 2.5%, stocks and shares ISA probably will,but the market could be due a fall.

Your choice ...

dimbo61

If you are going to overpay then do it each month when you get paid
So unless you can earn over 2.5% after tax in savings accounts then pay down the mortgage.
As others have said you could pay more into your pension.
Just remember BHS and Carillion and British Steel etc

Thrugelmir

If 5 years is your personal objective. Then investing probably isn't the thing to do as to short a time frame to ride out any volatility. Can you deposit the money saved and earn a rate better than the BMR?

Remember that future BOE rate rises are likely to be mirrored by the Nationwide. For every increase by 0.25% in the base rate your interest charge will be higher. The only guarantee that the Nationwide offer with regards to BMR is that it won't be more than 2% higher than BOE base rate.

Peelerfart

If you asked that question on the MFW board you know what answer you'd get:-), and that's where I started on MSE.

Dunstonh, as usual, has a valid point though. There are so many calls on any disposable income these days.

I'd overpay the mortgage personally, but hey I'm biased.

dunstonh

Personally, I have overpaid the mortgage and upped my pension. It would have been better all pension but a bit of moderation in different things suited me.

Financially, and all other points aside, the pension is likely to be the best "financial" option as the returns are likely to be 2-3 times higher than the interest paid and you get tax relief. Your property doesnt pay you an income in retirement. So, you do need your pension. Focusing all on mortgage may make you feel warm an cuddly now (or in 5 years) but it wont pay the pills in later life.

enthusiasticsaver

I would pay the extra monthly unless you are able to save at more than 2.5%. Paying it into your pension is another option but reducing outgoings by paying off the mortgage before you retire will help you by giving you more disposable income.