Discussion
Hi
I feel embarrassed bearing some of my financial details, but the advice and options offered on PH seem good.
I have a slightly strange mortgage deal with a well known lender. Essentially I have two mortgage accounts with the lender, detailed below
My strategy was to pay off mortgage #2, ASAP, whilst the capital growth on the investments and low interest rate just eat mortgage #1 away over a longer period. I would like to be mortgage free, in my mind, in about 7 years.
The two year deal is about to end on mortgage #2. What is my best line of attack. I would just like to know my options....
Could I claw the overpayments out of mortgage #1 and upon a new deal being organised, offset this capital against a new mortgage #2 deal? House is around £300k if it has any relevance?
Thanks for reading and TIA.
Mike
I feel embarrassed bearing some of my financial details, but the advice and options offered on PH seem good.
I have a slightly strange mortgage deal with a well known lender. Essentially I have two mortgage accounts with the lender, detailed below
- 1. Amount borrowed (currently) is approx. £75k. The rate is BoE base rate lifetime tracker +0.25%. £60k mortgage is interest only and I have about £40k investments (FTSE and old endowment) covering the capital. This is also being overpaid slightly by historic overpayments (£8k).
- 2. About £37k left as a typical repayment mortgage. Currently on a 2 year deal (2.09%). I am overpaying by about £4k per annum.
My strategy was to pay off mortgage #2, ASAP, whilst the capital growth on the investments and low interest rate just eat mortgage #1 away over a longer period. I would like to be mortgage free, in my mind, in about 7 years.
The two year deal is about to end on mortgage #2. What is my best line of attack. I would just like to know my options....
Could I claw the overpayments out of mortgage #1 and upon a new deal being organised, offset this capital against a new mortgage #2 deal? House is around £300k if it has any relevance?
Thanks for reading and TIA.
Mike
Ozzie Osmond said:
I can’t really follow your figures on the mortgage amounts. However,
No special attachment, but it is 19 years old and was due to run to 25 years. I thought there were penalties to coming out early? Also, I would still need a vehicle to pay the capital on the interest only part.mike9009 said:
My strategy was to pay off mortgage #2, ASAP, whilst the capital growth on the investments and low interest rate just eat mortgage #1 away over a longer period. I would like to be mortgage free, in my mind, in about 7 years.
Sounds a good strategy, but why not just pay the whole of that one off now, or at least as much of it as you can? Do you have some special attachment to the old endowment? What are its terms?Ozzie Osmond said:
Depending on your highest tax rate (40%/32.5%?) the FTSE dividend income will only just cover that 2.09% mortgage and your capital is “at risk”. It may not be worthwhile holding the investments, depending how you feel about the risk.
I am in the higher tax bracket. Fairly risk adverse, especially when it comes to our home.Ozzie Osmond said:
mike9009 said:
#1. The rate is BoE base rate lifetime tracker +0.25%.
This money is soooo cheap at present (0.75%) that you’re in the unusual situation of having a pretty good chance of making more from safe-ish investments than that mortgage is costing you. Again, it depends in part upon your income tax rate and whether you actually want to run any risk at all when your home is involved.Just an aside – if you’re a 40% taxpayer, how’s your pension? Because if you can borrow at 0.75% and then invest in pension which delivers 40% tax relief that’s well worth a look. But it would have to fit your overall situation since clearly interest rates may rise and once money goes into pension it has to stay there until age 55+.
Thank you!
Mike
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