Paying off mortgage in full or keeping it going

I am currently on a 1.83% mortgage that expires on the 2nd of January. I have sufficient funds to pay it off in full but i would like to keep my premium bonds running on the off chance i might win a million lol! Only thing is my follow on rate is 8.5%. My current mortgage is £102500 i have 50k+ in an easy access savings at 5% and 50k in premium bonds was thinking to pay a lump sum with all the easy access savings money and keep my premium bonds. What are peoples thoughts on this 🤔
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  • grumbler
    grumbler Posts: 58,629
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    Use some Premium Bonds calculator to estimate how much this chance of winning a million will cost you.
    That said, are you really going to pay this 'follow on rate' 8.5% instead of trying to remortgage at a lower rate?
  • Gam2015
    Gam2015 Posts: 144
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    grumbler said:
    Use some Premium Bonds calculator to estimate how much this chance of winning a million will cost you.
    That said, are you really going to pay this 'follow on rate' 8.5% instead of trying to remortgage at a lower rate?
    I will see what rates are available with current lender after my first lump sum payment. 
  • Hoenir
    Hoenir Posts: 1,254
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    Becoming debt free is a liberating experience. 
  • grumbler
    grumbler Posts: 58,629
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    edited 26 December 2023 at 1:00PM
    Hoenir said:
    Becoming debt free is a liberating experience. 
    Generally, 'debt free' can be net, i.e. when your savings are bigger than your debt (and yeld at least the same interest as you pay for your debts).
  • Hoenir said:
    Becoming debt free is a liberating experience. 
    But also completely pointless to do, if you can be making money while holding debt. 
    I have the money to pay off my mortgage, but choose not to. I use my debt to make me more money in savings. 
    Easy access are on the way down though so I would be worried about fixing and then finding your no savings are making you less in the near future than you pay on your mortgage.
  • I'm in a similar situation and had to made a decision earlier this month. My mortgage deal came to an end on 01/12, it is for 72k and has just increased from 1.19 to 5.49 on a new deal at the start of the month (annoyingly I think my deal expired at the peak of the rates), I did it for 2 years fixed as no product charge (which was a 1k) if it took it for 1 year.

    I have a cash ISA (38k) and a Stocks and Shares ISA (30k) so combined 68k. Whilst I get some interest/growth on my ISAs that more than over the increase in the monthly mortgage payments, not sure if that is sustainable, and with interest rates going down in the near future (apparently) it might have an impact on me. 

    For me, I decided to not use my savings to pay of the mortgage (or bulk of it) as whilst I imagine it is a great feeling to be mortgage free, it is also a great feeling to have savings.  If something drastic happened to you such as a job loss etc you could still pay the mortgage and sustain yourself until you are sorted out. 

    Just my thoughts.
  • Hoenir
    Hoenir Posts: 1,254
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    Hoenir said:
    Becoming debt free is a liberating experience. 
    But also completely pointless to do, if you can be making money while holding debt. 

    The OP has provided no information as to whether this is a viable option. 
  • penners324
    penners324 Posts: 2,603
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    Dump the premium bonds and pay off the mortgage. What's the best fixed rate you can get?
  • Personally I'd look at switching to an offset Mortgage product which offsets any positive savings balance against your mortgage debt before calculating interest, but still gives you access to your savings if you need them.
    I have been in this position now for 16 years, still have my mortgage (gives good credit ratings) and have the full mortgage offset in a savings account which means I'm immune to any rate changes, as interest is always zero.  If I use some of the savings then all I get charged is the interest on what I use for that month, until I put it back again.  I did this a couple of times when I bought a car, much cheaper rate than a car loan, effectively lending the money to myself.
    This way you'll have a choice.  You can halve your interest by keeping £50k in the savings account whilst gambling the premium bonds with the other £50k.  Best thing is that offset has the effect of giving tax relief too as interest is calculated after the offset has been deducted from mortgage balance.  Where you are now is that you are being taxed on the interest of £50k, but if it was offset, no tax would be incurred.
  • I wouldn’t advise moving onto the 8% rate. But there are better rates available, so if you can find a 4% mortgage then it’d be worth moving on to that and keeping your premium bonds/savings.
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