Is it worth paying my mortgage off early?

bobbyliver

Hello,
I am about to inherit enough money to pay off my £20,600 mortgage, which has a fixed 2.15% deal until 30/04/2027. My mortgage expires in 3 years and 5 months. I have had a statement to say the early payment redepmtion fee is £600.  Is it advisable to pay this early or wait until at least my deal runs out in 2 years 2 months time? and put my £20k into savings until this time? I have tried to find an online calculator to no avail and am assuming the latter option would be better but not sure. Thank you very much.

DE_612183

depends on the interest rate you get - but assuring you get 3-4% in a savings account then that would be better value.

bobbyliver

Thank you very much I thought as much but just wanted assurance. 

Mark_d

If you put 20k in a cash ISA and earn 4% tax-free, and pay 2.15% interest on the 20k you owe, it's fairly obvious that you earn more interest than the interest you accrue on your mortgage.
The benefit in doing this is even greater because (1) the interest on your cash ISA gets compounded whilst (2) the amount you're paying mortgage interest on is decreasing each month - and hence the interest component of your mortgage payment decreases.
This consideration shows what you should not do but what you should do depends on your personal circumstances.  I could pay off my mortgage now but I will keep it for another 20 years because I believe the return on my investments comfortable exceeds any mortgage interest over the entire 20 year period.

Brie

Agree that if you can earn more in interest than the mortgage costs you then don't pay it off until you have to.  

Most say though not having a mortgage is a wonderful feeling.  

pjcox2005

That would always be my view as well that you're better off keeping the money in savings. It does though assume you have savings plus job/health security and won't require/qualify for benefits at any stage. If potential benefits are in point, then that may give a different option as I believe savings may restrict access but others will be better placed than me to comment.