Pay off...or not

vashtherat

Hi -

My fixed term mortgage is coming to an end at the end of April next year when I'll be in the fortunate position to have enough savings to pay it off, if I want to. HOWEVER, this would leave me with a very small savings pot and there are a few things that need doing to the house like windows and repointing which I would then have to save up for. However, to complicate matters I'm currently in the middle of a subsidence claim, so until such time as my house is fixed, which doesn't look like anytime soon, I can't get anything done.

I'm currently on a very low mortgage rate, which would go up quite considerably if I took out another fixed term mortgage.

A Google search (well, AI, really) gave me an alternative idea, which was to pay a lump sum off my mortgage after the fixed term ends and then go onto another fixed term. It tells me that the two fixed terms could run seamlessly, but if this was the case, wouldn't I be charged the early repayment charge? In this scenario, I'd be hoping to bring my mortgage debt down to £10k and get a two year fixed term. Would this be doable? I'd be staying with the same lender (Lloyds). The alternative would be to wait until the mortgage reverts to the standard rate and apply then, but I'd be worried that I could be stuck on the standard rate. Not the end of the world as the interest would still be pretty low and it would give me flexibility, I just wondered what everyone else would do?

Many thanks for taking the time to read!

MFWannabe

How small would your savings pot go down to?
How much extra would you save each month by not having mortgage payment?
How quickly could you build your savings back up?
Personally I’d pay it off unless I had hardly any savings left that would make me feel uncomfortable

There are other options rather than a fix such as tracker and you can pay off as much as you like when you like

Windows etc can be saved for or put on a 0% card which is unsecured debt

Your house once you pay it off 😁

Slinky

Would anybody actually offer you a £10K mortgage? It's a long time since we applied but I think there was a minimum amount lenders would lend at that time of around £50K

vashtherat

https://forums.moneysavingexpert.com/discussion/comment/82149383#Comment_82149383

Thanks for the detailed response. My savings would go down to about £4000, if I paid my mortgage off completely, which would make me a little uneasy as until about the past 5 years, I had no savings at all. The reason for wanting the money for windows etc. is that when my house is finally fixed, it would make sense to get everything else done at the same time. My windows are about 40 years old and some of them don't close, but I should get a small sum towards a couple of them as they've been damaged as a result of the subsidence. Likewise, some of the pointing will need to be done when the house is repaired, so it would make sense to get the rest done at the same time. Especially if they already have scaffolding up.

I hadn't considered a tracker mortgage and didn't know you could pay those off whenever, so thank you for the suggestion. Something to definitely consider! On balance, I think I'd rather have a bit more of an emergency fund, with the option to pay off my mortgage whenever I wanted than to be completely mortgage free and very little emergency fund. If I didn't have the subsidence issue, things might be different!

vashtherat

https://forums.moneysavingexpert.com/discussion/comment/82149523#Comment_82149523

I think you're okay if you stay with the same lender, but I will double check everything closer to the time. I probably couldn't change anyway because of the subsidence and any fees would wipe out any potential savings too

MFWannabe

https://forums.moneysavingexpert.com/discussion/comment/82160498#Comment_82160498

When does your current fix end?
Sounds like you’d feel more comfortable holding on to more of your savings than the 4k you’d be currently left with

Have a look what rates your current lender is offering, does sound like a tracker would be more suitable than another fixed term