Mortgage advice

Hebrews12

Hi all. First of all, apologies for being a bit thick on this. I've looked online at various calculators etc and am still confused as I don't have a money brain.

Our mortgage is up at the end of December. We have £87,700 left on our mortage and 10 years to go. We also have £20,000 in savings getting an interest rate of about 4.4%. Is it better for us to overpay our mortgage by £20,000 or stay as we are?

I know interest rates will change on both the mortage and the savings but any advice would be greatly appreciated.

Hebrews12

Alternatively, would we be better off putting the £20K in, continuing to pay what we pay now and decrease the term of our mortgage to, say, 7 or 8 years?

Woodstok2000

Do you have sufficient savings elsewhere to cover you if anything unexpected were to happen?

poseidon1

My mantra is to never run down savings to pay off mortgages which you can currently comfortably fund from normal earnings, especially where such savings took a long period to accumulate.

In any event as indicated by @Woodstok2000 if this is the full extent of your savings which otherwise would need to cover any period of job losse, long term sickness or a whole host of unexpected financial mishaps, it would be most unwise to have expended it on a premature reduction to your mortgage.

Build up your house equity slowly whilst also accumulating (alongside) unencumbered savings, investments and retirement funds.

Hebrews12

https://forums.moneysavingexpert.com/discussion/comment/82133640#Comment_82133640

Just to clarify, we have another £12K - we just wondered what the best option would be in terms of either getting monthly payments down or ending the mortgage early.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82135235#Comment_82135235

I don't think the extra £12,000 you mention is a material amount justifying wiping out what would be over 2/3rds of your current savings pot.

I am aware that this particular forum constantly expounds on the virtues of becoming mortgage free as so as possible, often to the detriment of eroding savings which in this high taxed environment are painfully slow to replace.

If you have high enough earnings, you could look at offset mortgages which allows you to keep your savings intact ( but earning no interest), and you cease paying mortgage interest on the offset saving balance.

Certainly if you keep your mortgage payments constant, you slowly bring down your mortgage term with an offset mortgage but without piling your cash savings into your home as additional premature equity.

Off set was what I utilised until I no longer qualified for the product when earnings fell after retiring.