Paying off mortgage

[sattyb]

Current scenario is:
£20k sitting in account paying 2.25 AER, also have other savings and ISA.
£67k mortgage. Fixed rate of 4.4% ending mid 2025. Currently paying extra £200 per month overpayment so will have around £60k remaining when fixed term ends with approx 7 years remaing on mortgage in 2025.
Would you use the £20k to overpayment mortgage as I'm allowed unlimited overpayments during fixed term (as long as the total amount is not payed off in order to avoid Early Repayment Charge)?

Thanks in advance.

[Rick101]

Similar situation albeit slightly bigger numbers.

Paying the mortgage down 20k will save you 4.4% on that amount over the 2.25% your're getting, so a net 2.15% gain.
However I'm pretty sure you can get a rate well in excess of that.
Is your Personal savings allowance exhausted? Have you spare ISA capacity left?

I don't really see a great benefit in paying down partially. Either invest those savings or pay it off entirely.

Edited by Rick101 on Sunday 6th October 07:26

[mike9009]

Depends on a lot of factors.

I never amassed a large amount in savings as I would always split monthly excesses equally between pension, mortgage and fun.

I would look at pension first and see if you can boost your income with the 20k to enable you to put into pension. But obviously depends on your situation....


It feels it makes little sense splitting the 20k the way I would have done though....but who knows?

[osterbo]

Primarily this is a question about liquidity. Is your emergency fund appropriately sized? Is there any other large expenditure coming up? What happens if you get long term sick?

[Seventyseven7]

Move the 20K to an Investec 5% saver.

Or pay off the mortgage.

It’s not going to make a massive difference whichever option you choose to be honest.

[Sheets Tabuer]

How safe is your job, would you need your money in an emergency?

It financially makes sense to invest your money if it is getting a higher rate of interest than what your paying however emotionally you'd feel better paying it off your mortgage and depending on your age that can be quite a relief.

ETA you can use this overpayment calculator to see paying it off vs investing.

https://www.moneysavingexpert.com/mortgages/mortga...

Edited by Sheets Tabuer on Sunday 6th October 09:28

[RoadToad84]

I'm in a somewhat similar situation. About 60k left on my mortgage at 3.7%; 15k in savings at 4.8%
Currently overpaying about £100 a month (to make my payments a round £600). 12 years left on the term, 7 of those fixed at 3.7%
My salary is about £30k, so having 6 months in savings is quite reassuring, especially after an accident last year left me unable to work /get paid for 4 months.
I have been allocating £150 a month to an overpayment pot in Chase, with a view to clearing a lump sum from the mortgage each year, however I'm now wondering if that's my best plan, and would I be better off just increasing my monthlies by £150 instead?

My goal is to be mortgage free ASAP, but not to the detriment of my financial security. Very much a personal decision I think.

[FredAstaire]

If the 20k is your only savings then I would probably want to retain it as ready cash rainy day money.

On the other hand, a lot of mortgages that allow large overpayments also let you borrow the money back very easily, so I would find out about those terms before making a decision.

[Ari]

sattyb said:

Current scenario is:
£20k sitting in account paying 2.25 AER, also have other savings and ISA.
£67k mortgage. Fixed rate of 4.4% ending mid 2025. Currently paying extra £200 per month overpayment so will have around £60k remaining when fixed term ends with approx 7 years remaing on mortgage in 2025.
Would you use the £20k to overpayment mortgage as I'm allowed unlimited overpayments during fixed term (as long as the total amount is not payed off in order to avoid Early Repayment Charge)?

Thanks in advance.

Turn it around. If you had a £47K mortgage plus whatever your other savings and ISA are, would you remortgage to £67K just to put £20K into a savings account?

If the answer is no (and it should be), there you go.

[paulrockliffe]

Remortgage next year, move to an offset mortgage, have the flexibility to 'pay off' the mortgage or move money into higher interest accounts if they are available, or change your mind every other week.

[Cats_pyjamas]

paulrockliffe said:

Remortgage next year, move to an offset mortgage, have the flexibility to 'pay off' the mortgage or move money into higher interest accounts if they are available, or change your mind every other week.

It could be worth looking into this as an option, but look at the Total cost of the mortgage product. Especially when balances are relatively small, it may not make financial sense to do this if there is a say £1500 product fee.

As others have said, finding that balance is key. There is no point paying down on your mortgage only to find you need a new car in 6 months which you may need a loan for.

[Slow.Patrol]

paulrockliffe said:

Remortgage next year, move to an offset mortgage, have the flexibility to 'pay off' the mortgage or move money into higher interest accounts if they are available, or change your mind every other week.

Offset mortgage would be my recommendation.

Helped us pay off our mortgage early.

Best feeling ever having no mortgage.

[rossub]

Mortgage rates and savings rates are quite closely aligned at the moment, so not sure there’s much point paying off a chunk of the mortgage now if you move that 2.25% savings to more like 4.5%+

Re-assess when the current Mortgage deal ends and see what the difference between your Mortgage and savings rates are at that time.

I’ll be in a similar position by the end of my current Mortgage deal and that’s what I’m going to do - wait and see.