What is the most optimal way to become mortgage free?
idkwhattosay
Posts: 87 Forumite
I have a standard 25y mortgage with a 5y initial fixed period. Is it better to
1) overpay as max allowed by t&c every year
2) not overpay and put the savings down as a deposit on remortgage
As I understand remortgaging, there's no limit to what you can deposit when you remortgage so would it make more sense to save as much as possible in 5y time and then use that as a deposit when the time comes to remortgage? Or do people tend to overpay annually and chip away slowly like that?
I'm not quite clear on overpaying, does that decrease the monthly payment amount but the length of the mortgage stays the same or is it the other way around?
I'm interested to hear from people who are close to being mortgage-free or already are, what have you done that worked?
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Comments
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My "overpayments" go into a S&S ISA. Mortgage rate 2.6%, ISA + 20%. When the ISA balance = the mortgage balance I'll be mortgage neutral and can then decide what I want to do.1
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TimSynths said:My "overpayments" go into a S&S ISA. Mortgage rate 2.6%, ISA + 20%. When the ISA balance = the mortgage balance I'll be mortgage neutral and can then decide what I want to do.
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idkwhattosay said:TimSynths said:My "overpayments" go into a S&S ISA. Mortgage rate 2.6%, ISA + 20%. When the ISA balance = the mortgage balance I'll be mortgage neutral and can then decide what I want to do.
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"A Stocks and Shares ISA is an account that lets you invest free from capital gains and income tax. By saving on tax more of your money stays in your pocket."
Stocks and Shares ISA | 2020-2021 Investments | Vanguard UK Investor (vanguardinvestor.co.uk)
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TimSynths said:Of course not, its in an ISA the whole point of them is they are tax free.Isn't there a limit to what you can earn every year tax-free? Out of curiosity did you model this formula? I understand we're all in different financial situation so there's no one solution for everyone, I'm just wondering whether I should consider the same approach.The thing here is that you are putting your savings into an S&S ISA, so you are not decreasing your mortgage at all, you are paying your debt to the lender in full, so you will be at the mercy of remortgaging deals or accepting SVR at the end of the fixed period. How long will it take to save enough money in an ISA to pay off the mortgage? If it's a few years then I can see why it would be worth it, but if it takes 15y then in the mean time you will have being paying off interest on the mortgage. When you offset it against the ISA, is it worth it compared to taking that money gradually and putting it into overpayments or remortgaging?0
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Both. I’ve been overpaying max allowed and saving hard. It’s quite personal and it depends on all of your other commitments too.1
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idkwhattosay said:TimSynths said:Of course not, its in an ISA the whole point of them is they are tax free.Isn't there a limit to what you can earn every year tax-free? Out of curiosity did you model this formula? I understand we're all in different financial situation so there's no one solution for everyone, I'm just wondering whether I should consider the same approach.The thing here is that you are putting your savings into an S&S ISA, so you are not decreasing your mortgage at all, you are paying your debt to the lender in full, so you will be at the mercy of remortgaging deals or accepting SVR at the end of the fixed period. How long will it take to save enough money in an ISA to pay off the mortgage? If it's a few years then I can see why it would be worth it, but if it takes 15y then in the mean time you will have being paying off interest on the mortgage. When you offset it against the ISA, is it worth it compared to taking that money gradually and putting it into overpayments or remortgaging?1
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