Nearly there...but not sure what to do

VonSüdenfed

Hello Internet,

I’m at a bit of a pivotal crossroads in my life and I’d appreciate some advice and opinions on what are my best options.

I’m 38 ½, single (no dependants) and have a mortgage.  I find myself in a fortunate position where my savings now exceed the remaining amount on my mortgage.

I have 37k in savings and my mortgage amount is £36.5k.  I have been overpaying the mortgage by 10% of the original amount for the past two years.

My existing mortgage deal runs out in April 2027 and I’m currently paying interest of 1.89%.  As things are, I have 12 years left before the mortgage is fully paid.  There is an ERC attached to the mortgage.

I’m trying to decide what the best thing is to do financially. 

Currently, I can get an ISA fixed for one year at 5.5% with my bank or a bond at the same rate.

Would it be best to –

-          Pay off the mortgage in full (including ERC)

-          Continue to overpay at 10% each year and put as much as I can in an ISA/bond

-          Put as much as I can in an ISA/bond, let the mortgage deal end in 2027 and pay it off then?

Any other advice or suggestions would be really appreciated as I’m unsure what to do.

Thanks everyone,

S

killerpeaty

Personally in your position I would allow the fixed rate run its course and continue to save/invest because you're getting higher returns from your savings. But I can see that you may just want to pay it all off now that you have the cash to.

South_coast

How much would the ERC be, and how much would you pay in interest between now and the end of the deal?

P.S. Huge congrats for getting this far! Whatever you do, you are in an excellent position 😀

Moneywhizz

It would make more sense financially to put your savings into a fixed rate isa for 1 - 3 years since you won't be needing the money before then. After using up your isa allowance for this year you could put the rest into an ordinary fixed rate account, or even just an easy access account so that you can then put it into an isa next year. Just keep an eye on the amount you are earning in interest each year so that you don't go over your personal tax allowance. There is no risk to doing things this way, it will just be costing you less in the long run as long as you trust yourself to keep it for the purpose of clearing your mortgage when the fix runs out. You have done really well to be in this position at only 38. Gives you lots of choice for the future. Well done. 

Cornish_mum

We are also on a low rate fix and are saving in ISA fixed rate 1-3year accounts and regular savers rather than overpaying the mortgage. We aim to be mortgage neutral by the end of our fix in 2026. We may or may not pay it all off then depending on interest rates, work situations etc.

We are also contributing extra to our pensions and have separate emergency fund and long-term stock markets investments to meet all our goals.

Best of luck, you are in fantastic position 

CM

VonSüdenfed

Thanks for the responses and advice.  It's really appreciated.

I'd save money by paying the ERC and paying off the mortgage in a lump sum compared with paying the interest before the deal ends in 2027, but I'd like to keep some of the savings aside just in case anything unfortunate was to happen.

After reading the advice given on here, I'm thinking that putting as much as I can into an ISA until the mortgage deal ends in 2027 is probably the best option.  

Twenty years ago, I would have never thought I'd find myself in the position I'm in, so thanks for your kind words.

Regards,
S