sharesave / payoff mortgage

blue_bear · 2 March 2006 at 9:55PM

I have been reading the mortgage free threads with interest and I was looking for some help / opinions on the following.

At present I have 20 years left on my £80,000 C and I mortgage paying roughly £500 pm on a 5% fixed rate. I usually shop around every 2 years for the best product on offer and swap.

Myself and my partner also invest in the company 3 year sharesave scheme to the max £250 each per month.

The current scheme is due to come up in June and we are looking at a potential (obviously depends on company share performance at cash in - but fingers crossed) of turning our £18k savings into aprox £30k. Worst case would be around 20k.

So this throws up many questions for me re the mortgage

given that there is not another sharesave scheme open for us to invest in - the "spare" £500 per month that we currently save in the scheme- should we use this to overpay to the mortgage OR should we invest elsewhere?

If the company then open up a new sharesave next year (which is possible) and given that the discount is 20% off the price at offer with guaranteed minimum cash back plus interest - do we then go back into this at the expense of the above?

Also (yes I will watch out for CG tax) should we use some/all of the money we make from the sale of these shares to pay off a chunk of the mortgage? Or again should we invest elsewhere? Further property is a thought?

We are in our 30s with a 9 month old baby - if that helps?

Totally confused as to the best way forward here

Any help gratefully received

roswell · 2 March 2006 at 10:31PM

Here is some figures for you to consider.

Loan amount £80,000.00
Annual interest rate 5.00%
Loan period in years 20
Number of payments per year 12
Start date of loan 26/01/2006
Optional extra payments £500.00

Loan summary
Scheduled payment £527.96
Scheduled number of payments 240
Actual number of payments 95
Total early payments £47,000.00
Total interest £16,901.51

Monthly payment £1,027.96
Years 20 (Original term)
Years 7.916666667 (Term with over payments)

Total cost with over payments £96,901.51

Tptal cost with out over payments £126,711.50

roswell · 2 March 2006 at 10:34PM

If you make a bulk payment of 30000 and the 500 a month over payments you can get this down to under 5 years to be morgage free.

Total repay £86,275.76

blue_bear · 3 March 2006 at 12:16AM

Roswell - I am reading this right

If I over pay by £500 per month then we are talking just under 8 years and it will be repaid?

if I also pay off £30k lump then it can be done in 5?

if this is true it seems as they say - "a no brainer"?

roswell · 3 March 2006 at 2:05AM

Hi Blue_Bear,

Yes you read correctly, these figures are correct assuming you have no early repayment charges and the interest rate is correct, If anyone would like to check and confirm my figures please just so we know its correct.

Thanks

Thefunkygibbons · 3 March 2006 at 8:57AM

A sharesave is usually a no brainer especially in a company that is growing, but with the 20% discount plus the interest, it would be unusual not to get a double digit return

However, if one is not available, then the mortgage overpayment is the best idea

Certainly you should cash in, as it would be risky to leave that amount in the shares of just one company

blue_bear · 3 March 2006 at 9:57AM

thanks guys

I downloaded the excel spreadsheet I saw mentioned in an earlier thread - and played about with it

gives me the same figures Roswell posted - seems unbelievable that if we could stick to the £500pm we could be mortgage free in less than 8 years - for us well before the boy is out of secondary school

As for the sharesave - we have been very fortunate with these - and over the 10 years our company has run them we have at times hit double returns on the shares. I would agree anyone should use these as they are risk free and the potential for return is high.
Unfortunately there is no indication (for a variety of reasons) that there will be one offered when the current one closes. So rather than "waste?!?" the £500 I was thinking we should invest it somehow. The mortgage now seems like the place to go.

As for the money from this time - I guess the temptation is to use it to do up the house / go on holiday / put some by for a rainy day / future school costs / child costs and pay off some of the mortgage

better than the wifes idea of "we could always put it on black !!"

sharesave / payoff mortgage

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