Deleted Thread

492800

Deleted Thread

MWT

The usual topics come to mind like how secure you feel about your job and your desire to keep doing it...

Other things you could do with that sort of money to develop a revenue stream for the future into retirement, like buy-to-let...

Stuffing the money into your pension if that is an option and if it makes sense...

Looking for an Offset mortgage to keep your options open...

It is always harder to get the cash back out of your property than it is to put it in, but with current interest rates it isn't profitable to just 'save' any more so your question is timely...

dunstonh

Why just savings or mortgage?  Why not the other usual options people consider in this scenario. i.e. investments and pensions?
Typically, you find that pension is the most cost-efficient option (low-interest rate on a mortgage easily beaten by investment returns and tax relief on a pension etc etc).

That is pretty much how threads on this subject end up.   Logical financial option vs heart option.

MFWannabe

What is the interest rate on your mortgage? 
if it’s relatively low then I would keep the savings and overpay each month on the mortgage to pay it off quicker 

dimbo61

With the current situation I am very happy we have an Offset mortgage ?
We have savings of nearly 3 years income offsetting the mortgage balance.
If one of us losses our job we can cope for a year or two.
The offset account is earning the same interest rate as the mortgage.
Being mortgage free early also gives you options if you want to work part time or retire early.
How safe is your job ?
Having savings of more than £16,000 would effect benefits so paying off a lump sum now if your able to do this without ERC,s might be a wise move .

Thrugelmir

Do you need £55k in savings.  There's something reassuring in seeing your mortgage balance fall in these turbulent times and the mortgage term shortened. 

MFWannabe

492800 said:

I hope someone can give me advice or at least give me some food for thought.

I've got around £55k in savings, aged 45 and in the process of remortgaging after a 5 year fix.

I have a feeling I should maybe pay a big chunk off the mortgage eg £20k (?) but I'm trying to work out if I'm missing something. My mind is also oddly  saying "keep the savings" but I think that is just as I was brought up to save. 

A £20k chunk could probably shorten my term by 2 to 3 years (I've presently got 13 left) and my present mortgage is £121k .

I'm able to also save around £5k a year if I try so I can factor that in that I can make some savings back in the future.

Are there things to consider before making a big pay off.

Thanks in advance.

The other thing to think about is what ltv group you are in? Would paying a chunk off put you in a better ltv group and therefore lower interest rate? Especially as you’re going for a 5 year fix 
Some lenders don’t shorten the term of your mortgage (unless you ask them to); they keep term same and lower the payment. 
You say you could save 5k a year; so you could overpay mortgage by £400 per month and reduce term that way? 
Also how secure is your job? Would you feel more comfortable having what you have in the bank now or would be okay with less? 

Mickey666

The OP hasn’t really got £55k in savings, they have a £55k loan secured on their home and it will be costing them money.  Whether that’s a good or bad thing as far as their overall circumstances is concerned is another question, but it’s not really ‘savings’.

Zoe1345

My husband and I tend to think of it that we don't have X amount in savings, but we have X amount of untied cash - because essentially how can we have saving when we have a £200,000 loans with the mortgage provider. Looking at it that way helps us discern whether we need that to survive if either of us lost our job (we keep a year of his salary in the bank), anything over that, unless we want a holiday or a new car or something, we put it into the mortgage. The sooner we are "mortgage free" the more of our cash stays in our pocket and we can have what we would consider ACTUAL savings. I'd say to the OP to keep what you think you'd need to live for a year, but the rest I'd be tempted to pay off (you'll save more than whatever you out in in the long run as you'll of course save on interest!)

missymoneypenny

492800 said:

You have all given some great input thank you.. I do apreciate it
I have decided to pay off a £15k chunk. yes I could pay more and maybe in 2 years I will, but I'll let my level of risk settle in first. And I will keep a years worth of salary in the bank just in case.

I do have one question. how easy is it to take out from a mortgage (release equity?..  excuse my phrasing, I need to learn more about this). eg, If i get a massive bill that i need to get hold of a few thousand, is it simple process to get money from my equity (FYI, my present LTV is 30%) or is this really only possible when i remortgage after my fixed term ends?
thanks again in advance.

People are generally very, very cautious about equity release as it ties you up in a deal that usually is a massive con! There are good articles on this site about it - if you are the type of person who worries, and thinks large bills may happen (no matter how likely), then hang on to you money in your savings account, or some other easier to release vehicle, as re-accessing this way (ER) is very costly and usually seen as a last resort. Essentially you're selling off a part of your home that you can't get back. Remortgaging, for a higher amount at some point to raise cash, is sometimes possible I believe - others will be more expert than I am - but hold on to your pennies until you're very wise about the various possibilities! 

Thrugelmir

492800 said:

I do have one question. how easy is it to take out from a mortgage (release equity?..  excuse my phrasing, I need to learn more about this). eg, If i get a massive bill that i need to get hold of a few thousand, is it simple process to get money from my equity (FYI, my present LTV is 30%) or is this really only possible when i remortgage after my fixed term ends?

That's why holding emergency savings is recommended.  Life can through a curved ball at anytime.  A balanced approach of saving and debt repayment covers all bases.