Pay off mortgage in full or keep in offest?

crockpot

Just thinking that if I ever had enough money to clear my mortgage, should I?

Got 8 years left to go.

Say I had £20k in offsett and an outstanding morgage balance of £20k i would not be paying any interest on my mortgage,right? but would still have to pay a monthley repayment?

What do you do?

StuartGMC

I'm hoping to get to 100% offset next year so have considered this as well; for me the situation is thus:

1) The offset money is the emergency fund plus the usual annual saving for the holiday, car etc so I won't want to pay off the mortgage immediately. That said, I could if so desired, but then need to quickly replace the funds for the "rainy day" requirement.
2) Once you are 100% offset, you'll incur tax on the interest you'll earn for monies above this, which I guess means you either accept this or, pull out monies from offset and put to Cash ISA
3) We pay monthly into Stocks & Shares ISAs for growth over the long term, so once the mortgage is 100% offset any extra money will be paid into a Cash ISAs for tax-free growth

Is there much to be gained in paying off immediately? I think the savings are likely to be your life assurance per month, as you'll not need redundancy cover then.

If you keep the mortgage but overpay anyway you can balance the cash needed for that vs. other requirements, plus, you can draw on the facility in the event you find you need to do some work on the house etc.

Having said all that, I would still be looking to clear the mortgage early, just as soon as there was plenty of money saved to compensate for the amount used to pay off the loan to ensure cover for all the other things you need over time.

HTH

LindsayO

You are right, the more you put in the less interest you are paying, once you have the full amount in the offset account you are no longer paying interest. You have to continue to make payments to pay off the capital

What I hope to be able to do, (eventually) if I ever have the full amount in the offset account is to keep paying the monthly amount out of the offset account. That way I have in effect the ability to what amounts to a loan at a good rate, (since my mortgage rate is fixed) of interest up to the amount left to pay off.

One possible scenerio I see is that house prices go down and interest rates go up. I bought my flat just before house prices peaked, so to sell it anytime soon would not be a good idea, but if I ever got to the point of having the full amount in offset and I wanted to move, but not sell, its possible I would be able to rent my flat out, take money out of the offset account and use it for a cash sale on another place (assuming prices were low enough) and then pay the rent on my current flat into the offset account.