Pay off Mortgage or save?

[anonymous-user]

I'm quite lucky as I just have a moderate sized mortgage, around £70K which is about 20% of house value. I have an 'offset' mortgage & am paying a low rate, BOE base rate + 0.59% for the life of the mortgage, which I took out just before the rates dropped to zilch. So have been onto a winner for the last few years. Worryingly they will give me more at this rate, but I have resisted the temptation!
I want to pay off the mortgage early, but I'm sure it makes more sense to take savings out of the 'offest' account & get higher interest elsewhere (more then 1.09% after tax). Then pay off chunks of mortgage when the rates do increase to more than savings rate.
Or is it better just to reduce the mortgage for peace of mind & to take away any temptation to get any shiny new toys!
I should get some proper financial advice,as there are lots of variables such as dependents who may need financial help in the future etc etc, but any pointers here?

[sinizter]

Paying off the mortgage can make you feel better.

You may see better returns with the money invested elsewhere - but any investment has risks.

Entirely depends on your risk profile and what would make more sense for you.

Personally, if I had rates like that I would invest it in expanding my business, but that's because it currently has potential for expansion.

[DayTrader]

Don't pay it off. Next.

[fake7]

DayTrader said:

Don't pay it off. Next.

But why?

I'm in a similar position. Mortgage rate at approx 5% and savings rates around 3.5% at best, so I've been paying my mortgage off as well (but not sure if this is the best thing)

are there downsides? tax issues?

[anonymous-user]

fake7 said:

But why?

I'm in a similar position. Mortgage rate at approx 5% and savings rates around 3.5% at best, so I've been paying my mortgage off as well (but not sure if this is the best thing)

are there downsides? tax issues?

My main issue is that the savings rate is higher than mortgage rate I am luckily on (BOE+.59 = 1.09%)
So I guess it makes sence to invest at a higher rate than that..

[fake7]

Ah! at that rate it seems wrong to not keep the mortgage going and try and make money elsewhere.

[DayTrader]

Exactly - if the rate is higher from savings just put it there - not only are you getting a better return but you also have access to the money if you need it.

Plus - if you offset it and you won't pay any tax on the interest.

If your mortgage is 5% then you are probably best paying it off (but don't quote me on it).

[The Ferret]

DayTrader said:

you also have access to the money if you need it.

This is the key point for me.

Ask yourself an easy question, would you still have enough money to get by for say 6 months if you were made redundant. If the answer is no, keep the cash.

That's my take on it, and the approach I've taken. I've probably lost a shed load in doing so, through paying more mortgage interest and losing value in my stocks and shares ISA, but I know if I needed to I could lay my hands on enough cash to see me right until the next job comes along.

[northandy]

Im in a similar position, mortgage rate is 0.79% above BOE base rate, its an offset mortgage.

I moved my savings into my cash isa which is paying 2.7%, any i couldn't get in there i have been buying and selling shares with. I also have some other shares which i could sell but the dividends are good.

Im a firm believer in not having all your eggs in one basket, in fact when i needed to change jobs, i handed my notice in before i had found a new job, having savings made that decision easier, as it happens i found a new job before the end of my notice period.