Why I shouldn't pay off my mortgage??

JDB1988

Hi 

I'm hoping to pick the brains of the MSE collective!

I  am lucky to fi d myself in the current situation:
-40k savings (premium bonds at present)
-After bills approx £1250 left over each month 
- mortgage of around 100k on property 
- my partner is currently on maternity leave with our first child, it's unlikely she will be in full employment for the next year or 2 at least.

I could be mortgage free in 5 years by putting my savings and overpaying  each month. The house has a value of around 140-145k. 

It seems a bit of a no brainer to me, it's not our forever home but we would  be very unlikely to move in the next 5 years.

The alternative would be to either keep the status quo and just keep saving and cga g to a better interest pay account or to invest in another property or such like. 

Has anyone been in a similar position recently?

400ixl

What is your current mortgage rate and when does it end? Also, how much can you overpay each year and when is the anniversary date of the mortgage (when does that per year date arrive)?

It may be better to put the overpayments into savings if the rate is higher and maybe pay some off each year, or take a smaller remortgage.

Given your position of your partner being on maternity and unlikely to be in full time employment for 2 years I would certainly be keeping a decent sized fund accessible for that period, especially if it can be at a higher rate than the mortgage.

JDB1988

Current rate is 3.39% and ends in July 2023 and I can overpay 10% without charge each year 

South_coast

With your current fixed deal expiring so soon, it's definitely going to increase quite a bit, which could be tricky in terms of affordability with your partner on maternity leave. If I were in your position, I think I would be tempted to make a BIG OP now (even if that means paying an ERC, if you're in the last year of your deal it's probably less than your interest charge anyway). This would immediately reduce your balance and the monthly interest you are paying, and probably your monthly payments too, which will give you more disposable income each month and make everything a lot more affordable when it comes to remortgage time (plus we know energy bills will have increased by then too).

You'll need to crunch the numbers, and it will depend on what the lowest amount is you would feel comfortable having in savings, but I'd be thinking along the lines of maybe paying £35k now and then using the £1250/month (or whatever it ends up being if your payments go down) to either build your savings back up, or make more OP's to bring the balance down before the rate jumps, or a mix of both