Paying off Repayment Mortgage

zaapods

First, thanks to Martin and everyone here for a fantastic resource! You all deserve medals!

I'm not a newbie MoneySaver, but it came as a BIG SHOCK to me the other day when I realised how much my mortgage (I owe 68K over the next 17 years, with HFX at 6.75%) is actually costing. I shall be paying back 2.1 times what I borrowed!

(Good mortgage formulae site here btw: http://www.moneychimp.com/articles/finworks/fmmortgage.htm -- the arithmetic isn't as scary as it looks).

At a recent interview with a Lloyds Financial Advisor (Lloyds is my bank) Mr F.A. (!) promised "lucrative renegotiated mortgage possibilties" with Lloyds (well he would...)

BUT... I now have the opportunity to pay off some if not all of my mortgage debt. Can anyone suggest why this would NOT be a good idea?

Rule #1: pay off all debt ASAP, right?

Thanks to all
Z

sarahlouise210

I am no expert on mortgages or financial matters but if I had that sort of money I would rather put it in a high interest account and let the interest pay my mortgage! That way you still have your capital. Of course if you have considerably more than the 68K then why not pay off your mortgage. It is a dilemma indeed that most of us will never have to face (unfortunately!)

Xbigman

Paying off your mortgage is nearly always a good idea. You can occasionally have a happy position where you can get a mortgage deal so low you can earn the same or slightly more in interest on the money as savings. However, this situation rarely lasts in the long term and does cause other problems. If you are unemployed and have large savings you actually lose benefits.

A more interesting question is whether to reduce the term of the mortgage or keep the same term and reduce payments. Personally I opt for the latter.
You are currently paying 6.75 which looks like HFX's standard variable rate (SVR). Being on some ones SVR is one thing that I consider a financial crime. You can remortgage for 17 years and pay off a lump sum at the same time. Lower interest and smaller mortgage will dramaticly reduce you payments. Thats my advice.
Regards



X

Careful_ly

You could consider remortgaging to an offset. Then you could invest your cash in the savings part of it, and save on the interest, and leave the cash available if needed in the future. Example Britannia remortgage free deal (except for about £100 dispursements) no valuation fee, no legal fees. .74% over base rate = 5.49%

Froggitt

Forget that......go for Clydesdale offset at below 5%

TheDink

The Clydesdale offset mortgage is only available on mortgages over £100,000, so you would have to increase your mortgage (if the property value supports it) and put the excess in the offset account!

Hinckley & Rugby have an offset at no more than 0.95% above base rate, currently charging 5.35% (5.5% APR) with low/no fees.

Or get yourself a flexible mortgage, make a large overpayment with the savings you have and if you need the money in future, you can request some of it back.