Pay Off Mortgage with Savings from Cash ISA? WWYD?
Discussion
We have circa £44k left on the mortgage. Our ages are 54 & 53.
Mrs F has £50k in her 1-yr Cash ISA, on an interest rate of 5.76%, due to expire in a couple of weeks. She reckons she's achieving about £2750-3000 interest on it. Looking online, new rates are between 4.5-5%.
Our current 5-yr fixed rate mortgage at 2.14% is finishing in Sept, so it's time to either re-mortgage with Santander or explore other options. The term left is about 13 years but we could look at bringing down the term to pay more per month. Santander are offering 3 & 5 yr fixed rates at about 4.5%. There would be no fees in just going with them again. We currently have a low payment at £295pm, this will increase to around £345pm at the new rate.
Would paying off the mortgage with the Cash ISA be a sensible thing? Or would Mrs F lose more in interest over the term?
We would both then look at paying what would be our mortgage payments back into her bank to build up the fund again (we got together ten years ago from split families so have separate funds). Also, Mrs F doesn't have as much of a pension pot as me, probably 50% worth.
What about taking some from our pensions at 55? Is that an option?
Or should we just accept that we have a relatively low mortgage, the rates aren't too bad and just keep trucking along with it?
Are we robbing Peter to pay Paul (is this right analogy?)?
Mrs F has £50k in her 1-yr Cash ISA, on an interest rate of 5.76%, due to expire in a couple of weeks. She reckons she's achieving about £2750-3000 interest on it. Looking online, new rates are between 4.5-5%.
Our current 5-yr fixed rate mortgage at 2.14% is finishing in Sept, so it's time to either re-mortgage with Santander or explore other options. The term left is about 13 years but we could look at bringing down the term to pay more per month. Santander are offering 3 & 5 yr fixed rates at about 4.5%. There would be no fees in just going with them again. We currently have a low payment at £295pm, this will increase to around £345pm at the new rate.
Would paying off the mortgage with the Cash ISA be a sensible thing? Or would Mrs F lose more in interest over the term?
We would both then look at paying what would be our mortgage payments back into her bank to build up the fund again (we got together ten years ago from split families so have separate funds). Also, Mrs F doesn't have as much of a pension pot as me, probably 50% worth.
What about taking some from our pensions at 55? Is that an option?
Or should we just accept that we have a relatively low mortgage, the rates aren't too bad and just keep trucking along with it?
Are we robbing Peter to pay Paul (is this right analogy?)?
The day I paid my mortgage off, I closed my front door, gave it a pat and thought, YES, it's all mine now, even if I lose employment I will always have a home.
Against that, you have to balance income from savings against mortgage payment, would you be better off reinvesting the lump sum?
Or would peace of mind at having no monthly commitment be better?
If you both were made redundant, foe example, could you still make mortgage payments?
Against that, you have to balance income from savings against mortgage payment, would you be better off reinvesting the lump sum?
Or would peace of mind at having no monthly commitment be better?
If you both were made redundant, foe example, could you still make mortgage payments?
That monthly is nothing compared to other bills, I bet your food bill is more alone.
I'd be going for the money in the bank for a rainy day option.
We were similar when our mortgage was £200 a month but then those constant interest rises came in and we ended at £1200 a month. Then the house had to be sold.
I'd be going for the money in the bank for a rainy day option.
We were similar when our mortgage was £200 a month but then those constant interest rises came in and we ended at £1200 a month. Then the house had to be sold.
You are obviously making a small profit on the difference between the ISA rate ( tax free ) and the mortgage although rates will in all probability be reducing on that ISA over the next few years.
The mortgage is relatively modest in isolation but if zero would that be a good feeling for yourself and your wife ?
Maybe a slight compromise - either pay off the mortgage but leave a small amount (£5k) with them to a) have them store the deeds and b) keep a relationship ( is that even a thing any more ?) , or b) use half the savings to pay off that amount of the mortgage.
That will still leave you with a decent savings pot and a mortgage size to match which increases your flexibility and hopefully well being !
The mortgage is relatively modest in isolation but if zero would that be a good feeling for yourself and your wife ?
Maybe a slight compromise - either pay off the mortgage but leave a small amount (£5k) with them to a) have them store the deeds and b) keep a relationship ( is that even a thing any more ?) , or b) use half the savings to pay off that amount of the mortgage.
That will still leave you with a decent savings pot and a mortgage size to match which increases your flexibility and hopefully well being !
I think having 50k cash and such a small mortgage payment is a much more powerful or perhaps flexible position to be in than having 50k less cash and no mortgage payment.
I think having the knowledge that I could zero the mortgage any day I wanted would be as powerful for me as actually zeroing the mortgage,
It’s (for me) about the options you have, not the absolute position.
I think it would be silly to touch the pension personally, leave it to grow.
I think having the knowledge that I could zero the mortgage any day I wanted would be as powerful for me as actually zeroing the mortgage,
It’s (for me) about the options you have, not the absolute position.
I think it would be silly to touch the pension personally, leave it to grow.
Could offset with some providers using a cash ISA
Ultimately the difference in any option is pennies, it’s basically all down to cash flow and security from what you’ve said.
Also wasting your ISA allowance (arguably you already have by having it in cash) on something like this when you can’t get it back isn’t likely the best bet.
Ultimately the difference in any option is pennies, it’s basically all down to cash flow and security from what you’ve said.
Also wasting your ISA allowance (arguably you already have by having it in cash) on something like this when you can’t get it back isn’t likely the best bet.
Edited by okgo on Thursday 8th August 12:27
mark-3bw80 said:
Paid my mortgage off six years ago and it changed everything. All of a sudden I felt free and able to relax with my job, what's the worst that can happen when you own your home?, Do it, pay it off and feel the freedom.
Paid off mortgage 12 years ago, and i felt stress free. then 10 years ago, took out a BTL mortgage, but used the profit to pay the mortgage down.
Then had a mad idea in 2019 and bought a 2nd home, for use during the week, instead of living in digs. Add covid enforced lack of work, a lodger with alcohol issues and a repairs beyond my original man maths, the stress just doubled.
To reduce this, when the BTL came to the end of the fixed rate, we sold the 2nd home and used the equity to pay off the BTL mortgage. And got a job on lower pay nearer home.
All my stress mysteriously disappeared.
When your investment is outpacing the interest on your mortgage it's a no brainer, when it isn't it would be foolish to keep the mortgage.
If my maths are correct your 50k will be worth 84k in 13 years and you'd have paid 58k on your mortgage making you 2k a year better off having money in the bank assuming you get the same rates.
Personally I'd rather be sat there mortgage free at 55 and bung those mortgage payments in investments or have lots of weekends away with the wife.
If my maths are correct your 50k will be worth 84k in 13 years and you'd have paid 58k on your mortgage making you 2k a year better off having money in the bank assuming you get the same rates.
Personally I'd rather be sat there mortgage free at 55 and bung those mortgage payments in investments or have lots of weekends away with the wife.
Hustle_ said:
No info in the OP about income, liabilities, needs and wants etc so it's impossible to say.
Joint income circa £60k, both have a dependent, I pay maintenance for my youngest son (15), she pays a Uni house fee for her daughter, but that's it. No debt other than a couple of Next sofas!We enjoy a foreign holiday once a year (Mrs F would do more!), but we also rent a static in the UK 1-2 times a year with the dog.
Fastchas said:
We have circa £44k left on the mortgage. Our ages are 54 & 53.
Mrs F has £50k in her 1-yr Cash ISA, on an interest rate of 5.76%, due to expire in a couple of weeks. She reckons she's achieving about £2750-3000 interest on it. Looking online, new rates are between 4.5-5%.
Our current 5-yr fixed rate mortgage at 2.14% is finishing in Sept, so it's time to either re-mortgage with Santander or explore other options. The term left is about 13 years but we could look at bringing down the term to pay more per month. Santander are offering 3 & 5 yr fixed rates at about 4.5%. There would be no fees in just going with them again. We currently have a low payment at £295pm, this will increase to around £345pm at the new rate.
Would paying off the mortgage with the Cash ISA be a sensible thing? Or would Mrs F lose more in interest over the term?
We would both then look at paying what would be our mortgage payments back into her bank to build up the fund again (we got together ten years ago from split families so have separate funds). Also, Mrs F doesn't have as much of a pension pot as me, probably 50% worth.
What about taking some from our pensions at 55? Is that an option?
Or should we just accept that we have a relatively low mortgage, the rates aren't too bad and just keep trucking along with it?
Are we robbing Peter to pay Paul (is this right analogy?)?
Based on likely mortgage rates of 4.5% fixed over 5 years and a two year fixed ISA at circa 4.3% that I have seen then I would be inclined to keep the mortgage and savings in place especially since the mortgage is a relatively low amount.Mrs F has £50k in her 1-yr Cash ISA, on an interest rate of 5.76%, due to expire in a couple of weeks. She reckons she's achieving about £2750-3000 interest on it. Looking online, new rates are between 4.5-5%.
Our current 5-yr fixed rate mortgage at 2.14% is finishing in Sept, so it's time to either re-mortgage with Santander or explore other options. The term left is about 13 years but we could look at bringing down the term to pay more per month. Santander are offering 3 & 5 yr fixed rates at about 4.5%. There would be no fees in just going with them again. We currently have a low payment at £295pm, this will increase to around £345pm at the new rate.
Would paying off the mortgage with the Cash ISA be a sensible thing? Or would Mrs F lose more in interest over the term?
We would both then look at paying what would be our mortgage payments back into her bank to build up the fund again (we got together ten years ago from split families so have separate funds). Also, Mrs F doesn't have as much of a pension pot as me, probably 50% worth.
What about taking some from our pensions at 55? Is that an option?
Or should we just accept that we have a relatively low mortgage, the rates aren't too bad and just keep trucking along with it?
Are we robbing Peter to pay Paul (is this right analogy?)?
The only other thing I would maybe consider is using half to reduce mortgage, keep the repayments the same so that it is cleared down quicker or use the extra cash released to put money into pensions, especially since your wife hasn’t got as much in hers.
Whilst I'm personally allergic to debt, in this case I would keep the ISA (and add to it if able year on year).
Unless the ISA rules change (which I guess they might), this is tax free income in perpetuity, which might be very welcome indeed in retirement. Once you've withdrawn the money and spent it, you can't get back those tax free £20k allowances from previous years back.
Unless the ISA rules change (which I guess they might), this is tax free income in perpetuity, which might be very welcome indeed in retirement. Once you've withdrawn the money and spent it, you can't get back those tax free £20k allowances from previous years back.
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