£13.5k to invest or pay of the mortgage

Sti99y

Hi All,

Newbie here so please be gentle with me !. I have £13,500 in my bank account burning a hole in my pocket. I'm currently 2 years into a 5 year fixed rate mortgage @ 4.49%. I can pay 10% off each January which I intend to do this month. Any advice on aleternative investments or is wise to get the mortgage down as quick as possible ?

Cheers,

Sti99y

oldfella

why not get a 3 year fixed rate bond - easily get over 6% at the moment - after tax thats better than you pay on the mortgage. Then use the total amount to pay off the mortgage in 3 years time.

blinko

get your mortgage down as quick as possible unless you reckon you can get more from stock market etc in which case 4.49% loan is really good, but ideally your mortgage is your only liability !!!

Aegis

If you're a basic rate taxpayer, you would need to find an account paying more than 5.61% to beat the mortgage repayments. If you're a higher rate taxpayer, you'd need a minimum of 7.48%.

Paying off 10% of your mortgage now would reduce your interest repayments and might make your outgoings more manageable. Paying off some of the mortgage with your money means that the money is no longer instantly available for any emergencies which arise.

You need to factor in at least all this information before you make a decision. You probably also need to think about whether you will be remortgaging in 3 years or paying off the full amount.

In terms of longer-term investments, you could possibly get a good return by buying some index-linked savings certificates (tax free and guaranteed to beat the RPI by a certain level), though there is the risk that these will not grow as fast as your mortgage interest rate. Stock market investments would be ok if you were only planning on remortgaging in 3 years, but if you planned to pay off the mortgage at that point with this money, it isn't long enough to reduce the medium-term performance risks.

All in all, quite a lot to think about!

bilbo_2

I would pay off the morgage

Its a great feeling to have no mortgage:j

Jonbvn

Make sure you put some of the money into ISA's for you & your OH. ISA rates are much higher than your current mortgage rate.

Sti99y

Hi all,

Thanks for your replies. Even paying off 13.5k will leave me owing 120k (something around 105k in 3 years time when i will re-mortgage) My main quandry is the fact I'm on a low interest rate (4.49%). Can I make more money at relative low risk elsewhere rather than pay it off the mortgage. I have a decision date of 20th Jan !

chappers

As has been said you can if you can find a rate obove 5.61%, or 7.48 if you pay tax at the higher rate, so if you are a standard rate tax payer then most definitely (some current accounts are paying over 5.61%) if a higher rate tax payer then probably not.