Pay off part of mortgage or save?...


N

nielsonj1976

I have a mortgage of about £115k and various savings totalling around
£17k (ISAs etc). Now would I be better off keeping the savings
separate or just treat the mortgage as a debt and pay it off as soon as
possible?

I've calculated that if I put the savings into the mortgage and overpay
by £200 a month I'd be mortgage free in 10 years - something that is
very attractive. However most of the savings are in equities and
currently the returns aren't too bad (probably better than just paying
off the mortgage - as long as the savings are tax free that is!)

My current mortgage will fine me if I overpay too much too soon, but in
another year's time I can overpay by as much as I like, so do I just
surrender the lot and pay it back into the mortgage?

Anyone any thoughts on this?
 
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R

Ronald Raygun

I have a mortgage of about £115k and various savings totalling around
£17k (ISAs etc). Now would I be better off keeping the savings
separate or just treat the mortgage as a debt and pay it off as soon as
possible?

I've calculated that if I put the savings into the mortgage and overpay
by £200 a month I'd be mortgage free in 10 years - something that is
very attractive. However most of the savings are in equities and
currently the returns aren't too bad (probably better than just paying
off the mortgage - as long as the savings are tax free that is!)

My current mortgage will fine me if I overpay too much too soon, but in
another year's time I can overpay by as much as I like, so do I just
surrender the lot and pay it back into the mortgage?

Anyone any thoughts on this?
Whether it's worth doing boil down simply to comparing the interest
rates. Use the net-of tax rate for savings (which in the case of
ISAs is the same as the gross rate) and the actual loan rate.

The only other consideration is whether you place any opportunity
value on having savings available should an hour of need come
knocking at your door.

Given that your savings appear to be growing as fast or faster
outside the mortgage as they would inside, or be too close to call,
leaving them alone is probably best.

Given that you are able to overpay £200 a month, why not just do
that anyway?
 
J

JethroUK©

we got an offset mortgage with 1st direct (you only pay interest on the
difference between your outstanding mortgage and any savings you have with
them)

it's got to be your best option

i moved all our savings into 1st direct (£50 incentive to open all 3
accounts)
share dealing aside - there is no better way to invest your savings than
offsetting against your loans
+ you cant earn that much interest
+ you dont pay tax on the interst (since you dont get any)
+ interest is calculated daily (even fluctuating balances are offset against
what you owe)
+ you can offset as many acounts as you like
+ you can make iregular payments off your mortgage
+ you can re-borrow any monies paid off in a emergency

it's win-win situation





I have a mortgage of about £115k and various savings totalling around
£17k (ISAs etc). Now would I be better off keeping the savings
separate or just treat the mortgage as a debt and pay it off as soon as
possible?

I've calculated that if I put the savings into the mortgage and overpay
by £200 a month I'd be mortgage free in 10 years - something that is
very attractive. However most of the savings are in equities and
currently the returns aren't too bad (probably better than just paying
off the mortgage - as long as the savings are tax free that is!)

My current mortgage will fine me if I overpay too much too soon, but in
another year's time I can overpay by as much as I like, so do I just
surrender the lot and pay it back into the mortgage?

Anyone any thoughts on this?
 
R

Ronald Raygun

JethroUK© said:
there is no better way to invest your savings than
offsetting against your loans
What if you have more savings than loans?
 
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J

JethroUK©

Alan Holmes said:
I wonder why no one followed this up!
i thought it was a rhetorical question since there's obviously no point in
off-setting savings against loans you dont have

but if you owe more than you save, then offsetting is best way to invest any
savings you have
 

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