Should I pay off mortgage or save?

Rkd1989

Hi folks. In a fortunate position where after the sale of my BTL property and minus all deductions, I have circa £100k in my account and not sure what to do with it.

For reference, I'm 33 and currently live with my wife who is the sole owner of the house we are in and one thing we're looking at is paying off the mortgage here (settlement is £90k). We plan on moving within the next 1-2 years to a bigger house. We both have steady jobs paying into decent pension plans.

The alternative is put it into a fixed rate account for one year paying 4%.

I also had some ideas about buying a motor home and letting it out from time to time (we live in a pretty decent place for something like that) with the view to potentially starting a small business but I'm not sure I'd be able to commit the time required for that plus it's clearly the highest risk of the 3 options.

My gut feel is paying off the mortgage but I just want to make sure it's the correct option for us. Clearly since we're looking to move home, a fixed term mortgage isn't really an option (current fixed term runs out this month).

Any advice would be gratefully received.

Annisele

What's the interest rate on your mortgage / what will the rate be after the fix runs out? If the post tax return you'll get on the 4% fixed rate account is more than the rate you'll be charged on the mortgage, put the money into savings. If the interest rate is higher than that, pay off the mortgage.

Parisian

A offset mortgage might work for you - Barclays has a tracker offset mortgage at 1.22 above BOE base rate, although the arrangement fees are around £1750. Only 1% early repayment charge if you end before two years. 
Otherwise lots of fixed and discount offset mortgages available - YBS has some good rates at the moment for 2 year products. Some discount products you can leave early without paying any fees, I believe, from when I looked about a fortnight ago. 

MFWannabe

Rkd1989 said:

Hi folks. In a fortunate position where after the sale of my BTL property and minus all deductions, I have circa £100k in my account and not sure what to do with it.

For reference, I'm 33 and currently live with my wife who is the sole owner of the house we are in and one thing we're looking at is paying off the mortgage here (settlement is £90k). We plan on moving within the next 1-2 years to a bigger house. We both have steady jobs paying into decent pension plans.

The alternative is put it into a fixed rate account for one year paying 4%.

I also had some ideas about buying a motor home and letting it out from time to time (we live in a pretty decent place for something like that) with the view to potentially starting a small business but I'm not sure I'd be able to commit the time required for that plus it's clearly the highest risk of the 3 options.

My gut feel is paying off the mortgage but I just want to make sure it's the correct option for us. Clearly since we're looking to move home, a fixed term mortgage isn't really an option (current fixed term runs out this month).

Any advice would be gratefully received.

Will you need a mortgage when you move to a bigger house? If so I would put money into savings and earn some interest and then port current mortgage over to new house rather than getting a new mortgage. 

diystarter7

Hi
Dont forget you will be payig interest on the4% rate if you have 100k, so depending on your tax banding, consider that as well.
Thanks

dimbo61

For me !
Nothing beats the feeling of being Mortgage Free.
You can then save your mortgage payment in a high interest regular saver or two.
How  about premium  bonds as a gamble.
Clear the mortgage every day and you own your home.
You will still have £10,000+ in savings