Clearing my mortgage?
Discussion
I am in the fortunate position of having a fairly small mortgage now (approx 50k) with repayments far less than anywhere I could rent in the area. I'm not exactly loaded but manage to save a reasonable amount and have no other debts.
I will soon be receiving a sum of money which together with savings will be enough to clear the mortgage, which I personally like the sound of. Question is will it be better to clear the mortgage or invest the money, or pay a lump off it and invest the rest?
Talk of investment/inflation/interest etc is not something I'm all that familiar with. The extent of my financial wizardry is to spend less than I earn so just wondering what the best option is for me to take?
Thanks in advance for any advice, and if anyone knows of any sites that provide a decent idiot level guide to such things it would also be useful
I will soon be receiving a sum of money which together with savings will be enough to clear the mortgage, which I personally like the sound of. Question is will it be better to clear the mortgage or invest the money, or pay a lump off it and invest the rest?
Talk of investment/inflation/interest etc is not something I'm all that familiar with. The extent of my financial wizardry is to spend less than I earn so just wondering what the best option is for me to take?
Thanks in advance for any advice, and if anyone knows of any sites that provide a decent idiot level guide to such things it would also be useful
nammynake said:
What mortgage product are you on (fixed, tracker etc.) and what interest rate are you currently paying?
My current fixed rate period runs out next month, will revert to standard variable rate at 3.6% if I don't remortgage. I've not yet looked to see what deals are available.I'm more interested in longer term benefits from what I decide to do, the amount I currently spend on the mortgage wil be saved instead if I do clear it. Ideally in the future I'll be hoping to move to a house with a bit more land, double garage/workshop etc
greygoose said:
Check to see if there are any penalties for paying off the mortgage, depending on if there are/how much then I would pay it off as interest rates on savings are pretty poor compared to what you are paying on the mortgage. You can then build up your savings again.
penalties are to be avoided, most standard rate ones will alow any payments, any fixed time deals have penalties to stop you changing. Drip feed it in if you have to.softtop said:
greygoose said:
Check to see if there are any penalties for paying off the mortgage, depending on if there are/how much then I would pay it off as interest rates on savings are pretty poor compared to what you are paying on the mortgage. You can then build up your savings again.
penalties are to be avoided, most standard rate ones will alow any payments, any fixed time deals have penalties to stop you changing. Drip feed it in if you have to.Is redeeming your mortgage going to leave you with no "rainy day" money?
If it is you might want to consider lowering the mortgage balance substantially, but keep an amount of money back for emergencies. (3 or 6 months income are the usual guidelines for the amount of money you should have in the bank. How much you need is up to you)
If you then set up a smaller mortgage with a similar payment to what you are currently on, you will clear it that much quicker.
Remember that with tiny mortgages the interest rate becomes less important than setup fees, which can make changing your loan an overly expensive excercise.
a nice position to be in
only you can decide the correct option for you but if I owed £50k and had the ability to service such a debt for the foreseeable and then a lump sum of £50k arrived, here is what I would do
- Pay off £25k at the earliest opportunity (when no penalty applied)
- Put the other £25k in an instant access account / premium bonds / similar
- Leave the monthly payments on the reduced debt the same
- Reassess in 6 months / 12 months and decided what to do about the ~£25k debt then
If I felt the urge to clear the debt fully, I would. If not, I would look for an investment for the £25k and remortgage to the shortest term I could afford for the balance of the debt.
But my scenario is not yours and this is not advice.
only you can decide the correct option for you but if I owed £50k and had the ability to service such a debt for the foreseeable and then a lump sum of £50k arrived, here is what I would do
- Pay off £25k at the earliest opportunity (when no penalty applied)
- Put the other £25k in an instant access account / premium bonds / similar
- Leave the monthly payments on the reduced debt the same
- Reassess in 6 months / 12 months and decided what to do about the ~£25k debt then
If I felt the urge to clear the debt fully, I would. If not, I would look for an investment for the £25k and remortgage to the shortest term I could afford for the balance of the debt.
But my scenario is not yours and this is not advice.
Great position to be in hard work and not going too hard on excesses does pay.
Firstly ensure if you make any lump sum or clearing it don't incur costs/fees.
Personally I would clear it and then quickly build up a savings pot tp spend on v8's Antiguan holidays etc. I'd always aim to have the cash fully saved up then buy it rather than ever be in debt again. This is of course assuming I'm in the forever home.
Well done and don't rush to decide think all the options through and cost each out - although I doubt there will be much difference between them. Mortgage free is such a milestone you and your family are going to be so happy enjoy it.
Firstly ensure if you make any lump sum or clearing it don't incur costs/fees.
Personally I would clear it and then quickly build up a savings pot tp spend on v8's Antiguan holidays etc. I'd always aim to have the cash fully saved up then buy it rather than ever be in debt again. This is of course assuming I'm in the forever home.
Well done and don't rush to decide think all the options through and cost each out - although I doubt there will be much difference between them. Mortgage free is such a milestone you and your family are going to be so happy enjoy it.
My view - you're going to need high risk investments to beat the rate of interest you pay on your mortgage - so the best investment you can make is to pay off the mortgage, then pump all your previous mortgage payments into savings / investments.
That's my opinion, and what I did.
Others may be more willing to take risks than me, though.
That's my opinion, and what I did.
Others may be more willing to take risks than me, though.
Thanks for all the replies, spent most of last night looking at various options and trying not to give myself a headache (mortgage small print might as well be in another language).
From a quick look at whats available it seems that it will be more cost effective to pay the debt than save the money. Online calculator states I'll need at least 4.25% on savings to make it worthwhile. I'm not sure I want to use most of my savings in the process though. I'm now thinking bringing the mortgage down to 10-15k and get the kitchen/bathroom done, then clearing the mortgage altogether in about a year from now.
Then I'll worry about fast cars and holidays after that, always fancied a cerb or a 996 mmmmm....
From a quick look at whats available it seems that it will be more cost effective to pay the debt than save the money. Online calculator states I'll need at least 4.25% on savings to make it worthwhile. I'm not sure I want to use most of my savings in the process though. I'm now thinking bringing the mortgage down to 10-15k and get the kitchen/bathroom done, then clearing the mortgage altogether in about a year from now.
Then I'll worry about fast cars and holidays after that, always fancied a cerb or a 996 mmmmm....
This probably isn't the most gainful financially, but its fairly easy.
If you can, I would get an offset mortgage.
If yo are able to offset the full amount, then you pay no interest. even if you are 15k down, the actual interest paid would be low. The money is still yours to use as and when you need. Get the 996 or cerb cash, and keep the rest saved.
I would pay off the mortgage at the same amount that you are currently paying, and any extra savings, putting them aside for the kitchen/bathroom(assuming that your current one is still servicable)
The car can always be sold in emergencies, and if you buy right, the losses should be minimal, but you will gain the enjoyment/get it out of your system.
Too many people focus on the debt, and don't enjoy themselves until its too late....
If you can, I would get an offset mortgage.
If yo are able to offset the full amount, then you pay no interest. even if you are 15k down, the actual interest paid would be low. The money is still yours to use as and when you need. Get the 996 or cerb cash, and keep the rest saved.
I would pay off the mortgage at the same amount that you are currently paying, and any extra savings, putting them aside for the kitchen/bathroom(assuming that your current one is still servicable)
The car can always be sold in emergencies, and if you buy right, the losses should be minimal, but you will gain the enjoyment/get it out of your system.
Too many people focus on the debt, and don't enjoy themselves until its too late....
If you're on a pretty decent svr you may consider paying into ISAs instead. This is what I am doing as the rate I earn is the same as my svr. The extra benefits are that you are making the most of the allowances and not losing them plus it will be easier and cheaper to get the funds out if you need them in the future.
mcflurry said:
If you pay down a Nationwide mortgage you can leave a nominal £1 open.
It leaves the credit line and credit records open for future borrowing
+1 and they are responsible for storing all the paperwork etc! Plus saves the redemption fee which is like £100 or so. In summary a good idea IMO.It leaves the credit line and credit records open for future borrowing
What a great position to be in.
I'd vote for mortgage free living .... or leave a couple of thousand on it so you don't have to pay a solicitor to look after the deeds (think that's normally happens).
Just calculated in my head that I could also have been in your position. Had 5 years left on mortgage 5 years go, 2 sportscars, city breaks, loads of hols in the sun etc...
Life is now full of birthday parties, star wars, nintendos ...... and over 20 years of mortgage payments to go.
I'd vote for mortgage free living .... or leave a couple of thousand on it so you don't have to pay a solicitor to look after the deeds (think that's normally happens).
Just calculated in my head that I could also have been in your position. Had 5 years left on mortgage 5 years go, 2 sportscars, city breaks, loads of hols in the sun etc...
Life is now full of birthday parties, star wars, nintendos ...... and over 20 years of mortgage payments to go.
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