Payoff mortgage or wait? Best option?

badm88n

Hi,
I have an offset residential mortgage as follows:

• Remaining balance £54,484.99
• Variable interest rate currently at 6.75%
• Monthly payment amount £926.19
• Actual monthly payment £1,250.00 (always overpaid)
• No early repayment fee/charge

The mortgage is fully offset against £55,000 of savings, so I am not paying any interest on the mortgage. These are not the only savings I have, I use these to solely offset the mortgage balance.

I intend to keep up monthly payments of £1250 and the balance fully offset. Which should see the balance cleared in about 3.5 years.

My question, is there any benefit to keeping the mortgage for the next 3.5 years or would it be best to pay it off now with the £55,000 savings? If I paid it off now I could start putting the £1250 a month into a savings account.

Is there anything that I am missing? What would you do? Only benefit I see is if I suddenly need to use or dip into the £55,000 in savings, which is not likely.

penners324

Pay it off and put a chunk of those mortgage payments into a pension 

Newbie_John

I'd pay it off, the way it is now it's just a hassle really.

Depending on all circumstances you could always try to fix your mortgage for 2-5 years, get lowest possible rate let's say under 4% then put money instead to ISA/savings account and that could make few £ a month of profit..
If you could get 1% difference between mortgage and ISAs / tax free savings then you would earn £20 a month.

But this again is quite a lot of hassle for little gain, it would be much easier (and probably a better value too) to do what @penners324 suggested.

badm88n

Thanks for all your suggestions.
I am 56 and have a reasonable private pension and don't fancy contributing anymore into it. I'd rather keep any new savings out of the pension.
Will think things over. I have thought of one benefit that I did not mention. The mortgage has a reserve that I can access at anytime, up to £157,000. Of course any borrowing from the reserve is at the same interest rate as the main mortgage, so not exactly cheap. But it is quick access without having to go through any checks. If I do pay down the mortgage I am not sure if there is a way to keep the mortgage active, with say a nominal balance.

penners324

It your pension fund is over £400k then it's reasonable for an ok retirement. Given the tax advantages it is the best place for excess money.

Then a S&S ISA, then cash ISA.

badm88n

penners324 said:

It your pension fund is over £400k then it's reasonable for an ok retirement. Given the tax advantages it is the best place for excess money.

Then a S&S ISA, then cash ISA.

Thanks I understand. But after taking a 25% lump sum, I am not keen on having the rest of the money sitting in a pension. With it being drip fed to me, when I may pop my clogs the day after I retire. I'd rather have it outside of a pension, where I have a lot more freedom over what I do with it. As you say in a S&S ISA or cash ISA.