Thoughts on clearing mortgage?

[tight fart]

Fingers crossed I should have some funds coming that would allow me to clear my mortgage.
It’s £160k split £100k interest only£60k repayment.
Now it’s fixed at 1.29% till aug 26 and there is a 5% penalty for clearing early (max 10% overpayment)
Now I will call the lender to see if they will wave that, in the current market it would make sense.
But assuming they wont what shall I do with the money till then? (Wife has said no to new cars, bikes and coke or hookers)

[Sarnie]

Why would they waive the ERC?

[VeeReihenmotor6]

at 1.29% you're well ahead on inflation terms so I would let it run if you have an ERC to pay and be pleased you've got some cheap money on loan.

Stick the money somwhere else where it can perform better than 1.29% until the time comes and pay it off (if you don't want a mortgage in your life). Other pay the mortgage down to a more comfortable monthly payment and let the windful work for you elsewhere.

[ziggy328]

Doubt the ERC will go away - I'm in a similar position. I'm going to put some in Premium Bonds, and split the rest into the 2.7 to 3% savings accounts that are kicking about at the moment - most have upper limits of say £10K that they pay out the higher rate on so I'm opening quite a few. If you can find enough of them yo ushould be able to get 4 to 5K per year in interest.

[Scolmore]

I'd do exactly what Ziggy suggested.

Essentially sit tight until the fixed rate ends, whilst making sure your money is safe & indeed returning more than the 1.29% you are being charged on your borrowing.

[tight fart]

Sarnie said:

Why would they waive the ERC?

As the market has changed a lot since the rate was given, I can now get 2.75% on deposit with the same bank.

[BoRED S2upid]

Scolmore said:

I'd do exactly what Ziggy suggested.

Essentially sit tight until the fixed rate ends, whilst making sure your money is safe & indeed returning more than the 1.29% you are being charged on your borrowing.

This. Don’t pay the 5%. Great feeling to be mortgage free but not at that cost. Lock it away and wait a bit longer.

[funinhounslow]

Agree with the suggestion above too - premium bonds and the rest in savings accounts

Premium Bonds may not be financially “logical” but for a finite period it would be worth it for the excitement of checking each month.

You probably (almost certainly) won’t win a big one but it’s a risk free flutter every month for three years - you’re only “gambling” the interest you’d otherwise get in a savings account.

[randlemarcus]

tight fart said:

Sarnie said:

Why would they waive the ERC?

As the market has changed a lot since the rate was given, I can now get 2.75% on deposit with the same bank.

Ah, you're being logical. In that case, just stick the funds on deposit with them at 2.75 %, and be happy that you have beaten the bank If you want to feel mortgage free, stick payments due up to the ERC expiry aside, and pay the mortgage from there.

[Sarnie]

tight fart said:

As the market has changed a lot since the rate was given, I can now get 2.75% on deposit with the same bank.

It won't make any difference, you have both agreed to the T&C's of the mortgage.

Just stick it in their deposit account

[OMITN]

Do the maths (or get the mortgage provider to do it):

1. How much will 5% cost you
2. How much interest will you pay between now and the end of the ERC period

Then work out how much interest will you earn on deposit net of tax between now and the end of the ERC period.

Choose the route between 1 and 2 that costs the least or leaves you positive.

Congratulations - green with envy as I’d love to be mortgage free..!

[Bingowings]

Coventry Building Society

Fixed Bond (300) 30.04.2024
4.10%

AER*/Gross p.a.

(Fixed until 30.04.2024)

A statement-based bond fixed until 30 April 2024.

£160000 x 4% = £533/month x 24 months = £12792

Edited by Bingowings on Thursday 26th January 18:03

Edited by Bingowings on Thursday 26th January 18:04

[GiantCardboardPlato]

Don’t put 160k in one account, make sure you’ve distributed between different banks and can take advantage of the guaranteed protection should any of them go bust.

[anonymous-user]

Bingowings said:

Coventry Building Society

Fixed Bond (300) 30.04.2024
4.10%

AER*/Gross p.a.

(Fixed until 30.04.2024)

A statement-based bond fixed until 30 April 2024.

£160000 x 4% = £533/month x 24 months = £12792

Exactly what I would do.

[Bingowings]

"should any of them go bust"
Unlikely.

[Edible Roadkill]

I’m doing the same, got money spread between premium bonds and savings accounts. Santander e-saver, Marcus etc

Can pay mine without penalty from March though so that’s what I’m going to do.

Seen much better returns from the fixed savers than NS&I so far…..

[Pando99]

Also beware the amount of interest gained as you can only earn up to £1000 or £500 if higher tax payer in interest / dividends.
Look at ISA or premium bonds for no tax issues

[Bingowings]

ISA limit 20k/year.

3% (if you are lucky) = £600/year.

Edited by Bingowings on Thursday 26th January 18:42

[sjc]

Bingowings said:

Coventry Building Society

Fixed Bond (300) 30.04.2024
4.10%

AER*/Gross p.a.

(Fixed until 30.04.2024)

A statement-based bond fixed until 30 April 2024.

£160000 x 4% = £533/month x 24 months = £12792

Edited by Bingowings on Thursday 26th January 18:03

Edited by Bingowings on Thursday 26th January 18:04

I’m likely being thick as I’m tired but wouldn’t it be over circa 13/14 months to April 2024 … not 24 months?

[Bingowings]

Ah sorry I got a 2 year one in December which is now closed, they must be expecting interest rates to fall,
14 x £533 = £7462