Paying Lump Sum Off Mortgage

debbielee

We have recently moved house and took out a £28k repayment mortgage - tracker for 5 years at 7.0900%. We have been in for two months and were looking to decorate the house. However, we have approx £8000 and my sensible side is to pay it off the mortgage now.

We are allowed to pay 10% of the outstanding balance per annum and initially was looking at putting this 10% in a savings account until the end of the year and then pay it off. Also putting the £8000 into high interest savings account but am now wondering if it is better to pay off the mortgage rather than place it in a savings account.

I have looked at various savings accounts via this site but it's becoming a bit of a minefield.

Any advice would be appreciated.

Welshlassie

It is highly unlikely that you would be able to get a savings account with a net rate better than 7.09%.

If you are only able to pay off 10% of the outstanding balance then you would only be able to pay off £2,800 anyway, leaving you £5,200. I would put this in an ISA (£3,600 each) and start saving for next years over payment.

StuartGMC

Is this £8000 in addition to your 3-6 month income emergency fund?

You should always have this readily available, so don't throw it into the mortgage, but keep it earning interest where you can access it.

setmefree2

Ditto what they say. You need rainy day savings. You should put £7200 in cash ISAs (one each) . Additionally, the Halifax have a regular saver at 10% at the moment. You could drip feed the remaining £800 into that...but you need to be quick with this one as the deal will likely close soon (though it's supposed to be available until Jly 20th). Details on the savings board.