Paying off part of mortgage advice please.

IwanttobefreeIwanttobefree Forumite
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We have a variable rate mortgage with the Halifax, it's split into three sub mortgages.

Total balance as of today, £34,790

Sub account 2
balance as of today £16,582
Monthly payment £126.68
14 years 8 months left

Sub account 3
Balance as of today £6,914
Monthly payment £138.57
4 years 8 months left

Sub account 4
Balance as of today £10,580
Monthly payment £211.98
4 years 8 months left.

(sub accounts 1 and 5 are negligible, 1 = £542, 5 = £168)

I'm 55 and haven't worked for a number or years, and sadly due to health issues it's extremely unlikely I will ever work again (although it's not terminal)

I have transferred my pension into a drawdown one. It's worth (as of yesterday) 80k

I was thinking of trying to pay off our mortgage as quickly as possible as not having to pay out £489 a month would help us considerably. Wife works, but doesn't earn a great deal. Having that £489 a month to save for the next 15 years rather than paying off the mortgage, seems a more sensible option.

What I was thinking was, taking the 20% tax free portion of my pension and using it to pay off part of the mortgage.

That will be approx 20k (providing nothing serious happens until the pension is transferred, it's been raising steadily over the year so far)

That will leave 15K outstanding.

The decision is, which to pay off.

Paying off the £16,582, would save us £126 a month for the next nearly 15 years

Paying off the £6,914 and the £10,580 would save us £350 a month for the next nearly 5 years.

We aim to keep the payments the same as they are now (£489) .

Would paying the 15 year one off and adding £126.28 to the 5 year one be better or would paying the 5 year ones off and putting the extra £350 into the 15 year one be better?

I hope that makes sense.

I might possibly withdraw further from my pension to clear the rest. As I pay tax on any of the rest, and as I get £5800 a year on ESA, I'll probably do this at £5000 over the next two years, and hopefully the extra payments would mean I don't need to take any more?
The way things are going, soon we are all going to be victims of something or other.

Who will we blame then?

Replies

  • IwanttobefreeIwanttobefree Forumite
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    Ah, just found the mortgage over payment calc.

    Paying off the two 5 year ones and paying £350 a month extra into the 15 year one, drops it down to 12 years.

    Paying off the 15 year one and paying £126.68 extra into the 5 year one, drops it down to 3 years 6 months.

    No contest, I'll go for paying off the 15 year one. then look at maybe taking a bit of extra drawdown to clear the rest.
    The way things are going, soon we are all going to be victims of something or other.

    Who will we blame then?
  • Keith99Keith99 Forumite
    756 Posts
    Part of the Furniture 500 Posts
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    I'm not sure the first option answer is correct, as £350 for 12 years is c£50k.



    It will only matter if you have different interest rates, are any of them on a fixed rate and any ERC's to pay?
  • IwanttobefreeIwanttobefree Forumite
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    You're right, I misread the results for the first one, I didn't notice the word "Earlier" that followed it.

    So,

    Paying off the two 5 year ones and paying £350 a month extra into the 15 year one, drops it down to 3 years 2 months (couldn't put 14 years 8 months into calc).

    Not a lot of difference. will pay the 15 year one so that's out of the way, then we can clear the other mortgage totally within 4 years 8 months, or sooner if we pay a few lump sums.

    Might seem illogical as if I paid the 5 year ones off first, I'm mortgage free 4 months sooner. I'm just thinking along the lines of if our finances got a little worse, if the 15 years is paid off and we can only afford the £350 for the 5 years, it's still all over in 5 years. Psychologically wise, 5 years to go is a lot less stressful than 15 years (even though we will probably clear it off a lot sooner.

    First 4 accounts are variable rate 4.24%

    The 5th account (I presumed it was sub account no 5, but it's actually sub account 98) is full term fixed rate at 0% and runs for the same term as the other 15 year one.

    The balance for this account is only £168, and I currently pay it at 96p per month

    My last mortgage statement (6 months ago) said to clear all 5 accounts including any charges would be £37089.44 which was exactly the same figure as the mortgage balance on that statement.
    The way things are going, soon we are all going to be victims of something or other.

    Who will we blame then?
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