i need help with this calculation guys mortgage - savings

happyhero

I have an offset mortgage of about £70000 with between £2500 to £5500 offsetting savings, ie it varies but it is not a lot considering the debt. The mortgage interest rate with my mortgage for comparison it says is 6.2%.

But I have been putting money into stocks and shares since 1992 with not much sucess in the beginning but now I would say I average 10% profit each year and current balance is £55000. For ages I have been thinking of paying off the mortgage by selling all the shares and finding the rest by cashing in a couple of other things ie I have a Tessa that converted to a TOISA so I hopefully can get enough together to pay off the morgage.

The shares are invested through ISA's so anything I make is tax free except for the dividends which I would say dont make a huge difference in the overall picture.

Because my mortgage is an offset mortgage with daily interest, I see an interest added statement each month, in fact everything is made quite clear compared to some mortgages ie there is £70000 outstanding, I decide to pay £500 off each month but approximately £300 interest is added each month effectively reducing my £500 to a £200 payment so that at the end of the year 12 x £200 means I have paid off a measly £2400 off the £70000.

But if I paid the mortgage off tomorrow there would be no 10% going on the £55000 shares balance and I would have no mortgage and no savings.

I should further explain that I have very little other income but can just about manage and because of this do not pay tax as I do not have enough income, but i think I could manage just about which ever I went for.

Can anyone work out for me whether it is better to pay off the mortgage and have no savings (shares) either or keep the shares and keep paying the mortgage off slowly please, as my brain has given up trying to work it all out?

Any help greatly appreciated.

Jonbvn

Since your investments are tax-free you just need to compare the return on your investment (10%) vs your mortgage rate (6.2%). Therefore, provided you can consistently achieve a 10%+ tax-free return on your investments, it would be better to keep them, than pay-off the mortgage.

The difficult question is whether you can maintain a consistent return on your investments, given the recent market volatility.

gallygirl

The 55k is a great achievement :j , well done.

If I was you I'd pay the mortgage off. The shares could become decimated in value & then you'd be left with no investment & a large mortgage debt. If you pay off mortgage you'd be debt free and wouldn't need to worry about finding the mortgage money each month.

Also, if you are on a low income you may get benefits at some stage - you wouldn't if you had savings.

However, you could do with keeping some back for repairs etc - maybe pay most of mortgage off & stick rest in a cash ISA?

Good luck, you're lucky you have a choice

happyhero

Thanks guys it just feels painfull when you watch that £300 interest statement come in each month, that is money I will never see again a bit like throwing £300 in the bin every month. That keeps getting added to the mortgage each month and makes it seem a very slow process to make any headway with the mortgage top figure, plus I have to find £500 each month.

It seems it would feel very nice to pay the mortgage off and have nothing to find and no nasty £300 going on each month for someone elses benefit and I could even use my current £500 mortgage payment (or less, what ever suited me) to pay into shares to build up a new pot of shares again, but from what you say I suppose the maths says to keep things as they are.