Early mortgage payoff using pension lump sum advice please

gorby

Join Date: Mar 2008
Post Count: 1
Thanked 0 Times in 0 Posts


early mortgage payoff using pension lump sum advice please
I need £18000 to pay off mortgage which has 3 years to run and presently costs £550/month. I will receive a £30000 pension lump sum when I retire in 2.5 years time. What I want to do is to pay off the mortgage now using some kind of loan secured against the house which is valued at about £160000, or against the lump sum, and with either an interest only payment/month for 2.5 years or redemption in 2.5 years with no payment from now until then. The reason for wanting this is simply to have more money to spend now rather than waiting for the pension. does anybody have any suggestions?

dimbo61

contact your lender and ask if you can change your mortgage to
interest only for next 2.5 years and explain that you will pay it off from
lump sum when you retire.
But the question I ask myself is WHY
Why not carry on and have the house paid for by the time you retire
if not before !!
Are you going to have a great pension to retire on ?
£30,000 as a lump sum ?? not a lot to keep you in old age.
Your pension is likely to be 1/3 or 1/2 of you current income so using £18000
of your lump sum will leave little cash to enjoy your retirement.
GOOD LUCK

NeilQuinn

Like Dimbo said......if you simply switch to Interest Only with your current lender, at 7.5% that would cost you £112.50 per month.

gorby

I may have given a wrong impression. The lump sum is part of an nhs pension, it also includes a pension of about £850/month in 2.5 years for life. \if the mortgage was paid off now, I would have £550/month to spend or save and it would cost the interest on £18000 for 2.5 years. this would also need to be offset against the interest saved by paying the mortgage early. Does this make sense? the plan is to give me £550/month to spend now rather than wait for the £30000

Retired_I.F.A.

To pay nothing for the next couple of years what your saying is you want a mortgage or loan where interest rolls up. If such were available with no setting up costs or your current lender agreed to it and the rate was the same then yes you could have your live now pay for it later desire but finding such a loan in todays market you have very little chance if any.

NeilQuinn

If you're looking for no payments at all & the interest to roll up then I suppose an Equity Release scheme could work ( I'm no expert on these, as we don't do 'em).

If you looked at the interest-only scenario that I mentioned then you would be paying back £3375 in monthly repayments over the 2.5 year period and you would still have £12000 of your lump sum left over. You'd also have £438 extra spending money each month from now until you retire....would this be enough?

I'm not sure what the figure would end up at, if you took the deferred interest route but I'm sure it would make a much larger hole in your lump sum.

gorby

Thank you all for your interest and advice, Retired IFA and Dimbo61. If my mortgage company will agree to your suggestion that would be great and I intend to put it to them. I have checked out the roll up mortgage and the problem is that early payback costs a fortune, and at say 7% interest, equity in the house falls by about a doubling of the loan every 10 years. albeit it is never paid back until I die out of the sale of the house. I wish there was an investor I could approach who could lend me about £25000 at say 15%/year for two years, secured against the lump sum or the house. A pretty good short term return. If I had the money I'd be tempted. Thanks again for your advice.