To pay off or keep??

My Wife & I, are considering paying off 2 small top up mortgages that we have to our main mortgage. 2 years ago my wife was ill, we were fortunate to have a good Mortgage life policy. This subsequently paid off our main mortgage to the tune of about £100k. We are now left with two smaller mortgages that were linked as additional borrowing to the main mortgage. We owe just over £14000 in total on the two, If we pay these off in full which we are in a position to do, we would be £250 per month better off. Should we do this? We have no other outstanding debts or loans, paying these off would not wipe out all of our savings.  Your help would be much appreciated.

Top up 1 - 6years 3mths left, Balance £3787, Interest rate 2.04% fixed until Feb 2022, ERP £74.14, 
                 Monthly repayment £52.79

Top up 2 - 4years 7mths left, Balance £10760, Interest rate 1.44% fixed until Aug 2022, ERP £210.74, 

                 Monthly repayment £198.34
Thanks

Replies

  • CharlieCheezeCharlieCheeze Forumite
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    If it were me. I'd pay it off. At the end of the day, if you don't need the savings money right now and you're most likely not getting any interest on it, the best thing to do would be to pay off the debt that has interest on it.
  • MoneymindedMoneyminded Forumite
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    You say that paying your mortgages off would wipe out your savings. Given the current situation (and that life happens) I personally wouldn't deplete my savings to £0. I would keep 3-6 months worth of expenses in case you lose a job, your car breaks down, you need to replace a boiler, roof repairs, etc. Anything above the emergency fund that you currently have saved I might be tempted to throw at the mortgages. I would probably clear the smallest one first as it has the highest interest rate and it would be psychologically beneficial to see that go. Once that one is cleared I would throw the £52 monthly payment at the bigger mortgage/ clear it as quick as I can. 
    • Original mortgage end date: March 2041
    • Current mortgage end date: Jan 2033 (aiming for October 2025)
    • MFW 2023 #15 £5,235.88/ £10,000 /// 2022 #15 £7,315.24/ £7250 /// MFW 2021 #15 £8,530.07/ £8500
    • Daily interest is currently £2.65
  • 28crewchief28crewchief Forumite
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    You say that paying your mortgages off would wipe out your savings. Given the current situation (and that life happens) I personally wouldn't deplete my savings to £0. I would keep 3-6 months worth of expenses in case you lose a job, your car breaks down, you need to replace a boiler, roof repairs, etc. Anything above the emergency fund that you currently have saved I might be tempted to throw at the mortgages. I would probably clear the smallest one first as it has the highest interest rate and it would be psychologically beneficial to see that go. Once that one is cleared I would throw the £52 monthly payment at the bigger mortgage/ clear it as quick as I can. 
    I have not said it will wipe out my savings, quite the contrary it would leave a sensible chunk as a rainy day fund.
  • FtbDreamingFtbDreaming Forumite
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    I’d 100% pay it off then put the £250 a month towards rebuilding your savings or if you don’t need to them towards a nice treat for yourself! X
    Mortgage started August 2020 £69,700
    Mortgage ends Aug 2050 MFW: Aug 2027 
    Current Balance: £63,450
    MFW2020 #156 £723.13
    MFW2021 #26 £1184.71
    MFW2022 #11 £197.87
    MFW2023 
    Backup/ Neutral fund £920/£1000

    Determined to make it! 
  • edited 25 January 2021 at 2:26PM
    South_coastSouth_coast Forumite
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    edited 25 January 2021 at 2:26PM
    Agreed, pay them off and enjoy being MF. 
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
  • Mickey666Mickey666 Forumite
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    Given that
    You say that paying your mortgages off would wipe out your savings. Given the current situation (and that life happens) I personally wouldn't deplete my savings to £0. I would keep 3-6 months worth of expenses in case you lose a job, your car breaks down, you need to replace a boiler, roof repairs, etc. Anything above the emergency fund that you currently have saved I might be tempted to throw at the mortgages. I would probably clear the smallest one first as it has the highest interest rate and it would be psychologically beneficial to see that go. Once that one is cleared I would throw the £52 monthly payment at the bigger mortgage/ clear it as quick as I can. 
    I have not said it will wipe out my savings, quite the contrary it would leave a sensible chunk as a rainy day fund.
    Good news - in that case I'd definitely pay off the mortgage.  You are effectively borrowing the £14k at x% and storing in somewhere at y%.  My bet is that x is greater than y, in which case that £14k is costing you money so you need to consider what value you're getting from it.  Sometimes £14k in ready cash has value for emergencies or perhaps the need to buy a new car next year or some other planned expense.  In your case you're saying you've already got a 'rainy day fund' so the £14k is unlikely to ever be needed.

    My instinct would be to pay it all off.  Being debt-free is very liberating!
    Besides, at £250/month you could have it all back within five years.

    Might be worth checking for any early redemption penalties though.

  • MoneymindedMoneyminded Forumite
    271 Posts
    Third Anniversary 100 Posts
    Forumite
    You say that paying your mortgages off would wipe out your savings. Given the current situation (and that life happens) I personally wouldn't deplete my savings to £0. I would keep 3-6 months worth of expenses in case you lose a job, your car breaks down, you need to replace a boiler, roof repairs, etc. Anything above the emergency fund that you currently have saved I might be tempted to throw at the mortgages. I would probably clear the smallest one first as it has the highest interest rate and it would be psychologically beneficial to see that go. Once that one is cleared I would throw the £52 monthly payment at the bigger mortgage/ clear it as quick as I can. 
    I have not said it will wipe out my savings, quite the contrary it would leave a sensible chunk as a rainy day fund.
    Sorry completely misread your original post. In that case I would go for it
    • Original mortgage end date: March 2041
    • Current mortgage end date: Jan 2033 (aiming for October 2025)
    • MFW 2023 #15 £5,235.88/ £10,000 /// 2022 #15 £7,315.24/ £7250 /// MFW 2021 #15 £8,530.07/ £8500
    • Daily interest is currently £2.65
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