How To Pay a Mortgage off....

Spikeroon

Hi,
I am lucky enough to be able to pay off my mortgage early (having saved the amount required). The mortgage has a penalty clause, which expires in a couple of years - My dilema: how to go about paying it off ?

My current plan is to get an account (not my current / savings account)
Then seed that account wit the money required and pay out the monthly bill, until the mortgage is past its penalty fee period.

The mortgage is on a 2% interest rate (fixed): so if I can get an account with some form of interest to offset that it essentially reduces the net interest on the mortgage.

I know that there are current accounts that earn interest (and that they have recently taken a hit in the interest rate) but these only cover part of the value required ...

Can you get direct debits set up on ISA's, allowing me to keep the value in an ISA but manage the flow into the account paying the mortgage?

tacpot12

I don't think you will find an ISA that allows a direct debit, but a current account that pays interest would be ideal. You could shift your direct debit to the new account, or you could setup a standing order to pay the account that the direct debit is already setup for.

Spikeroon

Thank you tacpot12.
This is what I thought. I will shift the strategy to an interest paying current account as suggested: Obviously It means I'll play with the DD values to get the best interest rates.

Thank you again for the response.

BoGoF

Normally you are permitted to overpay 10% without penalty on a fixed rate mortgage - have you looked into this?

Spikeroon

HI,
Thank you BoGof: My own history meant that my personal preferance was to save first.
But thank you for teh reminder on this point - I will build some overpayment into the Direct debits I am considering and thereby reduce the overall interest - thank you for the sage advice.
ML

pjapk

If you have the funds already you'll likely be able to pay your overpayment allowance of 10% as a lump sum which should save you a bit of interest.
Halifax calculates their 10% allowance as of 1st January (I've just been looking up a vaguely similar scenario for myself but on the next mortgage)

getmore4less

Why is this money not already earning best rates?

Can you still pay from cashflow.

Best rates tend to be regular savers and current accounts but limited funds in each one.