To pay off or keep??

28crewchief

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

CharlieCheeze

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.

Moneyminded

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. 

28crewchief

Moneyminded said:

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.

FtbDreaming

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

South_coast

Agreed, pay them off and enjoy being MF. 

Mickey666

Given that

28crewchief said:

Moneyminded said:

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.

Moneyminded

28crewchief said:

Moneyminded said:

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