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    • Rossboy
    • By Rossboy 12th Jul 18, 11:28 PM
    • 5Posts
    • 1Thanks
    Rossboy
    35k savings 40K left in mortgage.
    • #1
    • 12th Jul 18, 11:28 PM
    35k savings 40K left in mortgage. 12th Jul 18 at 11:28 PM
    Hello,

    Im wondering if anybody can help me or offer advice.
    My mortgage is up for renewal in 6 months. I have 10 years left on my current mortgage(40k balance left) which the last 2 years i have made max 10% overpayments. Im wondering if i should cut my 40k down to a 2 year fixed mortgage which i can get for about 1650 a month and use my savings as an oddset each month to contribute to the mortgage payment.which in 2 years would use all my savings up and have me mortgage free. Also i think it might save me about 3500 in interest. As the rate 1.88% i can get on the 40k would be over 2 years and not 5/6 years due to sticking with my smaller payments and overpayments taking much longer.

    Hope somebody can offer me a little advice. I really only just thought about this tonight after reading an article.


    Thanks :-)
Page 1
    • GoingOn30
    • By GoingOn30 13th Jul 18, 9:10 AM
    • 83 Posts
    • 59 Thanks
    GoingOn30
    • #2
    • 13th Jul 18, 9:10 AM
    • #2
    • 13th Jul 18, 9:10 AM
    Yes that sounds like a good idea.
    Make sure in the meantime you have got some of your savings in high interest current accounts as you could be earning 3-5% interest on at least part of your savings for now.
    • ceh209
    • By ceh209 13th Jul 18, 9:16 AM
    • 762 Posts
    • 497 Thanks
    ceh209
    • #3
    • 13th Jul 18, 9:16 AM
    • #3
    • 13th Jul 18, 9:16 AM
    I was looking at cutting my mortgage down to be 2 or 3 years before I moved. My mortgage provider at the time said their minimum term was 5 years, I don't know if it's the same for all so worth considering. However I could have had a 2 year fix within that and still overpaid so it would have worked out similar anyway.

    Another thing to consider is do you want to use up all of your savings? If you commit yourself to a shorter term like that, what will you do if you lose your job? Maybe going something like 5 years is sensible so you have some cash for a rainy day aswell.
    Excuse any mis-spelt replies, there's probably a cat sat on the keyboard
    • ACG
    • By ACG 13th Jul 18, 9:44 AM
    • 17,154 Posts
    • 9,047 Thanks
    ACG
    • #4
    • 13th Jul 18, 9:44 AM
    • #4
    • 13th Jul 18, 9:44 AM
    No idea what your income is, but despite having the Mortgage as savings, you would need to pass affordability checks at 1650 a month.

    The alternatives could be:
    - An offset Mortgage, costs more, but as you have about 80% of your Mortgage balance in savings, it could end up costing you less.
    - A Mortgage with no early repayment charges.

    But it could be worth speaking to a broker. I only have limited information to work off so those suggestions might not be right for you.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • sal_III
    • By sal_III 13th Jul 18, 10:23 AM
    • 284 Posts
    • 266 Thanks
    sal_III
    • #5
    • 13th Jul 18, 10:23 AM
    • #5
    • 13th Jul 18, 10:23 AM
    Yes that sounds like a good idea.
    Make sure in the meantime you have got some of your savings in high interest current accounts as you could be earning 3-5% interest on at least part of your savings for now.
    Originally posted by GoingOn30
    Which ones do you have in mind? All that I know off are pretty much useless unless you are already banking with that bank, as they require you to have a "main" current account with them and then the savings are limited to couple of 1000's for a year or two with the total interests in the region of 100, you might as well just switch to someone that gives 100-150 switch bonus outright.
    • Niv
    • By Niv 13th Jul 18, 10:30 AM
    • 1,617 Posts
    • 1,393 Thanks
    Niv
    • #6
    • 13th Jul 18, 10:30 AM
    • #6
    • 13th Jul 18, 10:30 AM
    In your situation I would chuck 20k at it in 6 months time then re-fix the balance for X years. The interest would be minimal and would still have savings in the bank for a rainy day.


    Another thing to consider is; what could you be doing with your savings? Could it earn you more than the interest rate on your mortgage? So for instance could you put it into a S&S ISA for ~10 years and earn more in interest than you are paying on the mortgage (I believe the average returns on S&S ISAs over 10years is about 8% - that is not a guarantee though of course).
    YNWA

    Target: Mortgage free by 58.
    • jennifernil
    • By jennifernil 13th Jul 18, 11:04 AM
    • 5,039 Posts
    • 2,101 Thanks
    jennifernil
    • #7
    • 13th Jul 18, 11:04 AM
    • #7
    • 13th Jul 18, 11:04 AM
    I would investigate what the minimum amount a lender will lend is, and what the minimum term is, then see whether that is affordable out of income.

    If so, I would use some savings to reduce my borrowing to that amount and continue to make overpayments, if allowed and affordable.

    I would not use up all my savings, you do need a safety net.
    • AnotherJoe
    • By AnotherJoe 13th Jul 18, 1:03 PM
    • 9,838 Posts
    • 10,982 Thanks
    AnotherJoe
    • #8
    • 13th Jul 18, 1:03 PM
    • #8
    • 13th Jul 18, 1:03 PM
    My advice is, your monthly mortgage payments are trivial so instead of focussing on the "headline" of paying it off, let time (and inflation) take care of it over the next ten years since you would almost certainly be better off putting those overpayments into a pension.
    • Rossboy
    • By Rossboy 13th Jul 18, 3:45 PM
    • 5 Posts
    • 1 Thanks
    Rossboy
    • #9
    • 13th Jul 18, 3:45 PM
    • #9
    • 13th Jul 18, 3:45 PM
    [quote][/q
    • madvicker
    • By madvicker 13th Jul 18, 3:55 PM
    • 51 Posts
    • 29 Thanks
    madvicker
    It might be best not to remortgage. With many mortgages once you are on the SVR and not on a fixed term, there is no early repayment charge. So if I were you, I would check if you have early renewal charges once your term expires. If there are no charges, which is likely, then don't renew - put the 35k saving straight into your mortgage, and overpay the rest for 6 months afterward at ~900 a month. Of course, this is if you really want to go debt free in the shortest possible time.

    Edit: I have made an assumption that your income could support 900 a month for 6 months. Obviously, if this was going to be from your savings then the best thing would be to find the minimum loan, pay off the difference between that and your outstanding balance with savings. Fix for the minimum term they allow and just continue to make overpayments.
    Last edited by madvicker; 13-07-2018 at 4:02 PM.
    • Rossboy
    • By Rossboy 13th Jul 18, 4:27 PM
    • 5 Posts
    • 1 Thanks
    Rossboy
    Thanks for all feedback so far some great points mentioned.

    My savings are in High interest ICIC accounts. I have small amount of savings beyond this 35K so it is al for my mortgage if that is what it works out best to do with thay sum.

    AGC- great point, no my income will now allow me to have a mortgage with 1600 for example so that might not even be an option.

    NIV- an 10 year ISA might be better but i would like my mortgage paid. Then i am never tempted to use any money i have coming out on a fancy car or holiday in future. Its all invested. Personal choice.

    Another Joe- as above, if my mortgage is paid the money isnt available for other things, i maybe do need to look at my pension plan tho.


    Madvicker- best point yet, i never knew that was available as an option so i will call my mortgage provider tomorrow and ask that question exactly. Ps yes could handle 900 a month easy over a few months. Any other points?

    Cheers all
    • madvicker
    • By madvicker 13th Jul 18, 4:48 PM
    • 51 Posts
    • 29 Thanks
    madvicker
    Nothing more to add really. If you want to go debt free in the shortest possible time, then that is the way to do it.

    You could make your money work better using the low interest charges of the mortgage and advantages of pensions and whatnot to improve your financial status overall too. But I get that the psychological impact of debt makes that difficult - I'm very familiar with that feeling, all my debt is at 0% at the moment but I'm desperately trying to pay it off as fast as I can rather than use the interest free periods to make money elsewhere. It weighs too heavily on my mind....
    • Thrugelmir
    • By Thrugelmir 13th Jul 18, 4:52 PM
    • 59,226 Posts
    • 52,612 Thanks
    Thrugelmir
    Your options are really determined by what your lender has to offer nearer the time. Much could potentially happen in the coming months. Before you are able to make a choice.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • Rossboy
    • By Rossboy 13th Jul 18, 9:34 PM
    • 5 Posts
    • 1 Thanks
    Rossboy
    Madvicker- yes i agree about making it work better it is possible with savings accounts an pensions however yes its always in my mind so would rather pay it off. Interest rates could also raise a lot and therefor even out with ISAs and things to. plus i would rather have extra money available at a younger age to enjoy than benefit slightly more when older out of a pension, but that doesnt mean i wont still invest into that because i will.
    • AnotherJoe
    • By AnotherJoe 13th Jul 18, 10:52 PM
    • 9,838 Posts
    • 10,982 Thanks
    AnotherJoe
    Madvicker- yes i agree about making it work better it is possible with savings accounts an pensions however yes its always in my mind so would rather pay it off. Interest rates could also raise a lot and therefor even out with ISAs and things to. plus i would rather have extra money available at a younger age to enjoy than benefit slightly more when older out of a pension, but that doesnt mean i wont still invest into that because i will.
    Originally posted by Rossboy

    There is close to zero chance interest rates will rise so much that paying the mortgage off will be a better deal than a pension. If you are a high rate taxpayer (and i dont know if you are) you might as well set fire to money in the street than prioritise mortgage over pension. If you arent, then its still, with todays low mortgage rates pretty much the same as inflation or even less, financially its a very counterproductive way to "invest" your money.



    And whilst the mortgage may always be on your mind, it will be paid off anyway, whereas if the pension isn't on your mind, then whats making you contribute to it? It doesnt sound as if it is?



    A pension is nothing much different to a reverse mortgage, instead of paying off say a 200k mortgage you are trying to accumulate 200k (or whatever) for your future self. The difference being if you do nothing special the mortgage will wither away and be cleared anyway. Whereas you have to do something special for your pension to build up to a meaningful amount and most dont, paying in the minimum.



    Theres a whole forum full of deluded folks on here proudly boasting about overpaying their mortgage instead of their pension and when they retire some will literally be multiple tens of thousands of pounds worse off.


    Anyway, my rant is over, good luck to you whatever you do.
    • Rossboy
    • By Rossboy 13th Jul 18, 11:55 PM
    • 5 Posts
    • 1 Thanks
    Rossboy
    AnotherJoe- i have never really thought about it like that and it makes 100% sense to be honest, the way you explain it as-well yes i would be burning money technically as my Interest rate is low due to my LTV. I mean i work out i would save about 4-5k on interest paying the lump sum.

    I dont make over 40k a year so not high tax payer but i get options to work abroad then i could double my money so last two yeats i have been higher tax bracket.

    Im only 29, the word pension still doesnt sound right to me yet haha. I just feel being youngish, mortgage free, a lot more disposable income and flexability with what you want to do with it. One month holiday fund , next month pension fund. Could still be funding a big pension every year with the options. Does high % pensions only work with big number payments? You have opened my mind to think about how to go about this. So thanks for your imput.
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