Pay off mortgage or invest?

yorkiejohn

I'm paying an interest-only mortgage of £29,000 at 6%. I will shortly have access to £29000 in cash. I was going to pay off the mortgage, but now I'm beginning to think I should invest the cash in a one-year bond at 6.8% which I reckon would make me better off by over £200 in the year. Are there any flaws in my thinking? The trouble is, I have no experience of bonds and how safe they are. Any advice out there?

Jonbvn

Some issues you should consider:

1. Any remortgage fees in the future.
2. Tax on the interest on your bond.

Generally speaking, only tax-free savings (e.g. ISA's) will provide a better return than your mortgage.

liitleblackcat

Whilst I agree with Jonbvn in general, if you or your partner don't pay tax, you can save the money in their name and make more in interest than you save on your mortgage by paying it off.

My OH doesn't work due to illness and I pay 40% tax - so all our savings are in my OH's name apart from cash ISAs. We have a 5 year fixed rate offset mortgage with Yorkshire BS at 4.84% so we are quids in by not using the offset and saving at 6.5% with Kaupthing.