Should I pay off the Mortgage?

PieMistress

Hi,

So I have two separate mortgages.

One from my original house purchase (A) and the second one to cover the extra for when we moved home (B).  

Mortgage (A) is an old Nationwide one and has many benefits incl overpayments/borrow back with no extra charge. This is on a 6.75% interest rate so we have been steadily chipping away at this over many many years and there is now only £400 left on it with £51,000 in overpayments.

Mortgage (B) is on a fixed rate at 1.99% with 3.5 years to go.

So from next month mortgage (A) will be paid off and that nice little overpayment will disappear. Is it silly to be worried that I won't have instant access to that backup fund?    I do have savings but for some reason this felt like a little comfort blanket, knowing I could call the bank anytime and get that money back.  Partner thinks I am being ridiculous and that the monthly payments would now go towards saving for the kids instead of paying for mortgage (A).

Should I just make that last payment and have mortgage (A) done and dusted?  Or take out some of the overpayments, and get the kitchen done (not been touched since the house was built in the 80s) or put it into a savings account so I can access it if needed, and then continue to keep paying that mortgage?

I hope that makes sense   It's probably an obvious answer, but I just feel I need clarity!  Thanks in advance. 

silvercar

leave £1 owning, then you have no repayments to make and the funds available.

Hoenir

You've one mortgage with two sub loan accounts. Mortgage B is likely to see a considerable jump in a few years time. Worth putting some money aside in preparation. 

penners324

C) Keep making overpayment to bring down the 2nd part of the mortgage. Being mindful not to pay ERCs on this.

Then D) put mortgage payments into your pension.

Why is the 1st part of the mortgage on 6.75%? Awfully high

PieMistress

Thanks all for your comments.

The original Mortgage A is on a tracker, we decided it was worth keeping the flexibility/benefits of that particular Nationwide mortgage ie/ unlimited overpayments/payback (unaware of high % interest rates to come at that time!).

Mortgage B has 3 years left on the 1.99% fix and will be paid off at the end of the current fixed term.

Sorry, I am a bit confused about leaving £1 remaining on the mortgage due?  Thank you.

Exodi

penners324 said:

Why is the 1st part of the mortgage on 6.75%? Awfully high

Indeed, though it is too late to do anything now I wonder whether they could saved a fortune having done a rate switch on this product, and put the money they would have have overpaid in a savings account instead. I guess it's theoretical now.

PieMistress said:

I do have savings but for some reason this felt like a little comfort blanket, knowing I could call the bank anytime and get that money back.

We commonly see on this forum people getting carried away with just how large their emergency pot needs to be. While most agree it is sensible to keep at least a few grand in a savings account in case the boiler breaks or whatever, it's a tad excessive to keep tens of thousands of pounds in easy access accounts (and I expect people to disagree with me on this point because I've seen in the past some forumites mentioning that that they have a multiple of their annual expenditure as a contingency). We must also remember that MSE forumites on average are wealthier than the average person on the street so advice should be taken with a grain of salt.

Assuming you're not up to your eyeballs in other forms of debt (outside your mortgage), you always have the option should the absolute worse happen and the boiler breaks down and the roof suddenly collapses at the same time to take out a 0% credit card to fund it.

Personally I'd just pay off mortgage A and be done with it.

PieMistress

Mortage A was originally a fixed rate at 5%. When the fix finished it then moved onto a variable and for many years we were paying 2-3% on the Nationwide BMR rate, so pretty decent.  It's only been the past couple of years with interest rate rises that it has gone up to 6.75% (as of last month I think) so overall hasn't been horrendous.

Partner is inclined to just be done with it too.

silvercar

PieMistress said:

Thanks all for your comments.

The original Mortgage A is on a tracker, we decided it was worth keeping the flexibility/benefits of that particular Nationwide mortgage ie/ unlimited overpayments/payback (unaware of high % interest rates to come at that time!).

Mortgage B has 3 years left on the 1.99% fix and will be paid off at the end of the current fixed term.

Sorry, I am a bit confused about leaving £1 remaining on the mortgage due?  Thank you.

You said you want the flexibility to be able to draw down the overpayment. I thought leaving £1 outstanding would mean that you could do just that at the same time as not needing to make any monthly payment as the interest on £1 would be peanuts, whereas clearing it would close down the ability to take back the overpayments.

PieMistress

Hi, I didn't know you could do that re: just leaving £1 outstanding on the mortgage ie/ I thought you had to have monthly payments going out.  I know very little!

silvercar

PieMistress said:

Hi, I didn't know you could do that re: just leaving £1 outstanding on the mortgage ie/ I thought you had to have monthly payments going out.  I know very little!

May depend on the lender and exactly what sort of mortgage you have.

Jemma01

I'd get it over with, who needs debt in their lives?