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Paying mortgage or save

V3cash
V3cash Posts: 336 Forumite
Eighth Anniversary 100 Posts Name Dropper Photogenic
edited 23 March at 8:07AM in Mortgage-free wannabe
We have been really fortunate to have been left some money so we are looking at paying off mortgage.
however my mortgage interest is lower than savings and I have 2 years left.
interest 2.79%
Redemption about £1400 on mortgage.
i know it is sensible to save the money instead but even if we put max £ into ISA’s we will still then go over threshold and pay tax on savings.
we won’t get money until after April so can’t use the potential 2 lots of ISA’s
each.
i did input figures into martins calculator but I’m not sure if the boxes you tick for tax on interest works as nothing changed  on my results, it said I’d be £250 better off if I saved for a year rather than pay it off.


MFW 2027

£108.81 left to pay from 10% 
overpayment allowance, (July26).
End fix on 2.79% July 27 // MFW AIM July 2027

Mortgage  free Aim July 2027.
July 25 £57,000, £56950
August 25 £56,400
September £55,850/£55,800
October £55,195
November £54,600, £54,562.
December £54,000


Savings
£56,381 ISA/saving ac’s)
mortgage neutral 

Owed
Barclaycard £5200 (0%) Deal ends April 2026.


Comments

  • Veteransaver
    Veteransaver Posts: 783 Forumite
    500 Posts Second Anniversary Name Dropper
    Yeah I wouldn't pay off the mortgage until the fix ends due to the early redemption fee..
    Unless you end up in the 40% tax bracket then even paying 20% tax on any savings interest outside the ISA should be able to still beat 2.79%
    Assume there is 2 of you so you can open an ISA each, there's £40k.
    If you are both 40% tax payers then it may be worth seeing how much you can pay off the mortgage without penalty (most allow 10% a year, check the terms)
  • V3cash
    V3cash Posts: 336 Forumite
    Eighth Anniversary 100 Posts Name Dropper Photogenic
    edited 23 March at 8:32AM
    Yeah I wouldn't pay off the mortgage until the fix ends due to the early redemption fee..
    Unless you end up in the 40% tax bracket then even paying 20% tax on any savings interest outside the ISA should be able to still beat 2.79%
    Assume there is 2 of you so you can open an ISA each, there's £40k.
    If you are both 40% tax payers then it may be worth seeing how much you can pay off the mortgage without penalty (most allow 10% a year, check the terms)
    Thanks for advice and yes we have factored both of us using our ISA allowance and giving our daughter some money too( have looked into that in detail so understand the inheritance tax gift allowance for later when we pop our clogs)
    Overpayment would be an option. It’s just 10% and i have already been overpaying a bit so i will call and see how much is left of allowance.
    I have car on finance but it’s 0% so that won’t even be useful either but i will pay that off in February when term ends.
    i don’t have other debts apart from 0% credit card so that’s not even worth paying 😕

    MFW 2027

    £108.81 left to pay from 10% 
    overpayment allowance, (July26).
    End fix on 2.79% July 27 // MFW AIM July 2027

    Mortgage  free Aim July 2027.
    July 25 £57,000, £56950
    August 25 £56,400
    September £55,850/£55,800
    October £55,195
    November £54,600, £54,562.
    December £54,000


    Savings
    £56,381 ISA/saving ac’s)
    mortgage neutral 

    Owed
    Barclaycard £5200 (0%) Deal ends April 2026.


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