Pay off mortgage completely or part and pay off DMP

I am in a position to pay off my £50,000 mortgage completely in may 2023 when my fixed rate ends - however, I have £12,000 owing on a DMP - should I pay off that and pay only £38,000 off the mortgage leaving a mortgage owing £12,000 (which I would pay off over 5 years) Obviously the DMP is interest free. (I’ve no desire or need for credit in the future) Is it an obvious answer? I think I’m overthinking it. Can anyone offer any advice?

Comments

  • ManekiNeko
    ManekiNeko Posts: 238
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    Hi Twinfun,

    I think a lot will depend on your SOA, so you'll probably get better quality advice if you felt able to post that up.

    My personal take is that it's best to pay off interest-bearing debt before interest free debt, especially given the high inflation at the moment (and consequent rising mortgage interest rates). In your shoes, I'd therefore be looking to pay off the mortgage.

    A possible exception might be if you make full and final settlement offers to your creditors in the DMP, as you could possibly pay it off for less than the full £12k, depending on your circumstances.

    If the £50k is savings you have now, you should probably check whether you have any obligations under the DMP to use it towards debt repayments - the DFW board will be your best bet for advice here. I've never been in a DMP so have no idea on that front.
    Completed on first home: 30 June 2022
    Mortgage outstanding: £68,499 £64,841.60
    OPs made or saved (2022-23): £315.52
    OPs made or saved (2023-24): £690.24
    OPs made or saved (cumulative): £1,005.76 (1.47%)
    Interest saved to date: £ *to add*
    % of mortgage paid off: 5.34%
    MF date: June 2056 October 2055
    Daily interest costs: £3.10 £2.90 and a half pence (as of 12.02.2024)
    Emergency fund: £0
    Debt to DS: £10,000 £7,209.01. 27.91% repaid (DFD: Aug 2027 Nov 2030)
    Debt to DP: £1,423.55 (this will increase until DS repaid)
    Debt to non-profit: £4,500 £4,239. 5.8% repaid


  • Thank you for your input that helps a lot 
  • ManekiNeko
    ManekiNeko Posts: 238
    First Anniversary First Post Name Dropper Photogenic
    Forumite
    You're welcome :)
    Completed on first home: 30 June 2022
    Mortgage outstanding: £68,499 £64,841.60
    OPs made or saved (2022-23): £315.52
    OPs made or saved (2023-24): £690.24
    OPs made or saved (cumulative): £1,005.76 (1.47%)
    Interest saved to date: £ *to add*
    % of mortgage paid off: 5.34%
    MF date: June 2056 October 2055
    Daily interest costs: £3.10 £2.90 and a half pence (as of 12.02.2024)
    Emergency fund: £0
    Debt to DS: £10,000 £7,209.01. 27.91% repaid (DFD: Aug 2027 Nov 2030)
    Debt to DP: £1,423.55 (this will increase until DS repaid)
    Debt to non-profit: £4,500 £4,239. 5.8% repaid


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