Paying Off The Mortgage

I am due some  compensation hopefully soon so wanting to pay off the mortgage. We owe £66000 and I understand they will be charge if we pay it off in full. Can we pay off £65000 and pay off the remaining £1000 say £250 a month?. Not sure how it works.

Comments

  • savingholmes
    savingholmes Posts: 26,851
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    It depends whether you have any early repayment charges on your mortgage.

    Your original mortgage offer should tell you. Or you can ring and ask.

    Before you put it all in your mortgage have you checked what your pension provision is and whether the tax relief would mean that's an attractive option?

    There are also savings accounts that may pay better interest than what you save paying off the typical mortgage. All things to think about...
    Achieve FIRE/Mortgage Neutrality by mid 2030
    1) MFW Nov 21 £201,999 with 237 payments to go - now £184,341 Equity 26.26% (lower post move compensated by EF)
    2) Mortgage neutral by June 2030 AVC £7,613/£127,466 AVC target 5.97%
    3) FI Age 60 annual income target £12,500/30,000 41.66%
    Achievements: CC free since April 22. 1 year EF from Jan 24 & dedicated pot for home improvements
  • davejjt5
    davejjt5 Posts: 25
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    It depends whether you have any early repayment charges on your mortgage.

    Your original mortgage offer should tell you. Or you can ring and ask.

    Before you put it all in your mortgage have you checked what your pension provision is and whether the tax relief would mean that's an attractive option?

    There are also savings accounts that may pay better interest than what you save paying off the typical mortgage. All things to think about...
    I have just checked and early payment charge is nearly £4000. Don't know what you mean by pension provision or tax relief.
  • davejjt5 said:
    It depends whether you have any early repayment charges on your mortgage.

    Your original mortgage offer should tell you. Or you can ring and ask.

    Before you put it all in your mortgage have you checked what your pension provision is and whether the tax relief would mean that's an attractive option?

    There are also savings accounts that may pay better interest than what you save paying off the typical mortgage. All things to think about...
    I have just checked and early payment charge is nearly £4000. Don't know what you mean by pension provision or tax relief.
    When does your current mortgage deal expire? Usually you can overpay by up to 10% per year before the charge applies. It may make more sense to pay off 10% (or whatever applies, check your t&cs) and then pay the remainder when you are no longer locked into a deal. £4000 sounds like a lot though on a such a small mortgage, have you signed up to a longer term deal? Basically you need to do some calculations to work out what is the best way of doing it. Or as someone else suggests, you may get better returns long term putting it in your pension (not an expert on this at all, again you need to look at figures and do some calculations to decide what is best for you).
  • savingholmes
    savingholmes Posts: 26,851
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    Pension provision

    Do you or your partner / other half have a private pension? You can put up to £40K per year into a pension and get tax relief. If you don't have a good pension already - that could be an option. It depends how close you are to retirement whether that's a good option for you and how much you want to clear the mortgage. If you've not been paying much into your pension in the past you may be able to use the £40K from 2 previous years too.

    If you wanted to explore that as an option you could post on the pensions board or see an independent financial advisor. Or you could just stick with repaying the mortgage.

    You could also look at the top savings accounts if you didn't want to invest
    https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
    Achieve FIRE/Mortgage Neutrality by mid 2030
    1) MFW Nov 21 £201,999 with 237 payments to go - now £184,341 Equity 26.26% (lower post move compensated by EF)
    2) Mortgage neutral by June 2030 AVC £7,613/£127,466 AVC target 5.97%
    3) FI Age 60 annual income target £12,500/30,000 41.66%
    Achievements: CC free since April 22. 1 year EF from Jan 24 & dedicated pot for home improvements
  • davejjt5
    davejjt5 Posts: 25
    First Anniversary First Post
    Forumite
    davejjt5 said:
    It depends whether you have any early repayment charges on your mortgage.

    Your original mortgage offer should tell you. Or you can ring and ask.

    Before you put it all in your mortgage have you checked what your pension provision is and whether the tax relief would mean that's an attractive option?

    There are also savings accounts that may pay better interest than what you save paying off the typical mortgage. All things to think about...
    I have just checked and early payment charge is nearly £4000. Don't know what you mean by pension provision or tax relief.
    When does your current mortgage deal expire? Usually you can overpay by up to 10% per year before the charge applies. It may make more sense to pay off 10% (or whatever applies, check your t&cs) and then pay the remainder when you are no longer locked into a deal. £4000 sounds like a lot though on a such a small mortgage, have you signed up to a longer term deal? Basically you need to do some calculations to work out what is the best way of doing it. Or as someone else suggests, you may get better returns long term putting it in your pension (not an expert on this at all, again you need to look at figures and do some calculations to decide what is best for you).
    We took a £95000 mortgage 9 years ago for 25 years, so got 16 years left which stands at about £62000 we owe.
  • davejjt5
    davejjt5 Posts: 25
    First Anniversary First Post
    Forumite
    Pension provision

    Do you or your partner / other half have a private pension? You can put up to £40K per year into a pension and get tax relief. If you don't have a good pension already - that could be an option. It depends how close you are to retirement whether that's a good option for you and how much you want to clear the mortgage. If you've not been paying much into your pension in the past you may be able to use the £40K from 2 previous years too.

    If you wanted to explore that as an option you could post on the pensions board or see an independent financial advisor. Or you could just stick with repaying the mortgage.

    You could also look at the top savings accounts if you didn't want to invest
    https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
    I am in West Yorkshire Pension Fund and wife is in another. I am 47 yr old but a health issue will stop me doing my job by the time I might be 50 or so. The compensation we are wanting is to cover my wage and pension till retirement age. 
  • savingholmes
    savingholmes Posts: 26,851
    Name Dropper First Anniversary Photogenic First Post
    Forumite
    If you go ahead and clear the mortgage what would you live on?
    Achieve FIRE/Mortgage Neutrality by mid 2030
    1) MFW Nov 21 £201,999 with 237 payments to go - now £184,341 Equity 26.26% (lower post move compensated by EF)
    2) Mortgage neutral by June 2030 AVC £7,613/£127,466 AVC target 5.97%
    3) FI Age 60 annual income target £12,500/30,000 41.66%
    Achievements: CC free since April 22. 1 year EF from Jan 24 & dedicated pot for home improvements
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