Would you pay mortgage off

Gam2015

Currently have a mortgage for £46500 at 5.2% roughly £200 pound interest per month. I have max holdings on premium bonds and won average of £150 per month so far this year. The early repayment is 1% so about £465 it drops to zero in May 2026 should i cash premium bonds in and settle my mortgage been thinking about it a while or wait until next May. 

silvercar

 £200 interest until May 26 is 8x200=£1,600. 

Or lose £150x8=£1,200 PB wins +£465 penalty =£1665. You would retain £3k in premium bonds which would be more volatile, but on average would win £72, so your theoretical loss is only 1665-72=£1,593. Making the decision marginal.

Except you also need to factor in changing interest rates, unless you are on a fix, plus losing the opportunity to win big on the premium bonds.
 So roughly speaking it’s as broad as its long.

FrugaiMacDugal

Get the mortgage ape off your back, freedom.

Then do £10 a week on lottery

On-the-coast

FrugaiMacDugal said:

Get the mortgage ape off your back, freedom.

Then do £10 a week on lottery

That made me smile...
and yes you'd be free.. free to do what you want, but imo putting £10/wk or £520/yr into premium bonds would give you just as much "hope", plus guaranteed returns.    Even better stick £500 a year into a S&S ISA tracker fund!

Brie

Presumably you're paying more than £200 interest on your mortgage so if you use your premium bonds to clear that then you can used that whole monthly mortgage payment you had to buy more bonds again.  

jimjames

I definitely wouldn't pay off until there is no penalty. Up to you after that but financially would make sense to pay off if mortgage rate is more than your returns.

Mark_d

Gam2015 said:

Currently have a mortgage for £46500 at 5.2% roughly £200 pound interest per month. I have max holdings on premium bonds and won average of £150 per month so far this year. The early repayment is 1% so about £465 it drops to zero in May 2026 should i cash premium bonds in and settle my mortgage been thinking about it a while or wait until next May. 

That interest rate does sound high on the high side.  If you have surplus in your cashflow, you can usually overpay by 10% without triggering the ERC.

As it happens I do have a mortgage where ERC applies until July 2028.  I've long had the funds to repay the mortgage in full.  However (1) I believe that the income I generate from my investments comfortably exceeds the mortgage interest rate and (2) the mortgage payments aren't holding back my lifestyle.  For these reasons I have no plans to repay the mortgage until the end of the mortgage term.

strawb_shortcake

We had the money to pay off our mortgage about 6/7 years ago (we still could). However we knee we wouldn't have the discipline to save the monthly payments of circa £450pm, the mortgage was affordable and we felt we'd be better off having substantial savings for the first time. 
I have no regrets, we have paid some off the mortgage but we have options in making our money work best for us, I'm working on being mortgage free in my early 50's (10 years away).