Biggins

My current 2 year discounted rate mortgage with the Halifax ends next month and I have started to look at my options for remortgage.

I am wondering whether, before moving to another provider, it would be prudent to pay off a chunk of my mortgage amount. The current balance is approx. £50k and I have approx. £20k in savings which is spread amongst ISA's and Savings A/C's.

Do I simply find a new Mortgage with whoever (recommendations???) and move the whole amount over. Or, do I pay off a chunk using my savings and then start a new mortgage on whats left.

Any views?

GaryK

I would pay off the mortgage any day of the week, someone told me years ago for every £1000 you pay off you save a £1000 might not be as much now with the lower interest rates but still the best thing to do IMHO.

Gary

davegtt

IMO youd get a better deal (interest rate wise etc) if you paid the 20k off your morgage and swap 30k to another morgage provider rather than 50k

Vegescoob

Pay off 15k and keep 5k on reasonable access savings for a "rainy day" if you have not much disposable income after living costs.

Tiggs

not rocket science...compare your saing rate to your loan rate.

if your loan is at 3% and your savings are at 6% then borrow more and save it!

AdiM

There's no point having any savings to speak of if you have a mortage IMO. To give you an example, last year I paid off £5k of mine and, keeping the payments the same ( about £550/month ) I reduced the term by 3 years. 36 months x £550 = almost £20k saved over the remaining 12 year term.

Bodgery

More complicated than that. When you switch mortgage, they will profile the interest payments so as to ensure pretty much all interest in first few years, eventually paying off more capital as the term proceeds.

My advice is as someone else here, and it's what I do - stick as much as you can afford into paying off the mortgage, always ensuring you have enough in reserve that covers unexpected bills etc.

Cheers

Vipa

If you can find me a savings account paying 6% net and a mortgage charging 3% (with no rediculous conditions attached to it) I'll take 3!!!!!!!

Look at the interest rate you are paying on your mortgage from a different angle and try to see paying a lump off as putting money into a savings account.

If your mortgage rate is say 5.5% then paying money off the mortgage will be like investing the money into a savings account which gives you 5.5% net!!!

So the moral here is..... pay it off your mortgage...... Like Vegescoob says though don't use all your liquid capital, you still need some kind of rainy day fund.

Paul

As far as recommendations are concerned, PM me and I'll see what I can come up with for you. (I'm a Mortgage Consultant)

Tiggs

i didnt know that....so near the end of the loan will i not be paying any interest? its all soooo complex.

Vipa

Basically.... yes... in the early years the bulk of your monthly payment will be interest and in the later years the bulk will be capital. Unlikely that you would get to the point where none of the monthly payment was interest though.

Paul

Daz34

I will be doing something similar, keeping a tidy sum aside in an ISA.
Paying off some of your mortgage lump sum always makes sense.

Tiggs

no it doesnt

Daz34

To me it does although I was tempted to blow it on a Scooby

Tiggs

is what you meant then!

Daz34

You stick it under your mattress then mate

Tiggs

my cash based money is outperforming my mortgage....net.

Nexuas

I was very depressed to get my first yearly statement through from our new mortgage.

Paid in about £8000 and only paid £1500 off the capital!!!! The rest is paying intrest!!!

Scooby-Doo

I agree

Tiggs

good

fast bloke

fek me - you can't turn around here these days without someone trying to sell you a mortgage



btw - the argument about the early years interest payment v's the later years capital payment is irrelevant. If you can get a higher net rate on your savings than you are paying on your mortgage, you will be better off having the larger mortgage and the savings. When you are talking about 20k, it probably won't make much difference. (less than a tenner a month for best deposit account v's best free transfer mortgage)

Tiggs

thank goodness a pro has turned up...i was getting very confused and about to cash in all my high yeilding cash assets to pay of my dirt cheap mortgage.

fast bloke

don't do that -


Now - where should I send the bill for advice?

Tiggs

not sure where you can send it....i can tell you where to stick it though

moses

mate as gary said pay of the mortgate my friend


last thing u want is to still work till your 60 odd mate

if your mortgage gets paid off its the best thing ever, u have nothing to worry about

in the future what u can do is once u pay it off

get a mortgage for maybe 20k afterwards and invest it into 2 flats

10k each deposit and take out a interest only mortgage on them and rent them out to dhs or anyone private

the values of your homes will go up and u will be getting rent mate

in 10 yrs time u can sell one property and pay of the mortgage on your home and second flat


or use that 20k u have on 2 different flats

and rent them out bud and reap the fruits get a interest only, payments will be alot less

Tiggs

i can leave financial services happy that good advice is now free to all!

wilf

Think

1 Will you really save the cash if you keep it?
2. Are you interested enough in finance to find the right investments to outperform the best mortgage you can shop around for?
3. Are you interested enough in finance to keep reviewing your choices when your investments get downgraded and lenders keep switching their rates?

If the answer to any of the above is No then I suggest you pay off your mortgage as quickly as possible.

Vipa

[QUOTE=fast bloke]fek me - you can't turn around here these days without someone trying to sell you a mortgage


QUOTE]

Not trying to sell anything to anyone....and take exception to the suggestion that I was! just a professional offering a some free pointers to a fellow Scoob enthusiast. Difficult to post anything in the public domain without causing myself a compliance headache!

Whilst I agree to a point with some of the posts here re: 'dirt cheap' mortgages and 'high yield cash accounts' they are difficult to find without onerous conditions attached to them.... a mortgage with a 1% rate is not difficult to find but you will more than likely be tied to the lenders 6.odd variable rate for the rest of your life after the initial rate ceases 3 months down the line.....

High yield savings accounts are, I'm sure out there but again I would be very surprised to find many with a net yield as high as mentioned on here with easy access and again no onerous conditions....

the point is... for us mere mortals who aren't financial gods or called Gordon Gekko (or retired or not working!) it would be difficult to find unconditional investments with a NET return greater than an unconditional mortgage that didn't require a full time Fund manager to keep an eye on things 24 hours a day!

And I think Wilf hit the nail on the head, I couldn't trust myself with £20k of easily accessible cash in the bank...... And most people are the same... If you can get at it... you WILL find something to spend it on... rainy days happen far too frequently!!!

And... Biggins.... Find a local INDEPENDENT mortgage broker/consultant and get some advice. You will have the choice to either pay for the work/advice and have any commission paid back to you or let them get paid via commission. Either way you get the same deal as you would if you went into the lender themselves and the broker will have access to 000's more mortgages than you can find on your own! (I have 21,782 mortgage products at my fingertips right now... try surfing for that lot on the net!!!)

Paul

Bubba po

I have an offset motgage account. The money I have saved in it is deducted from the balance of the mortgage I have still to repay. What this means, in effect, is that my savings are earning interest equivalent to the mortgage rate. And they're instantly accessible, too. I think this is a great concept; why isn't everyone doing it?

ProperCharlie

Because the rates offered on offset mortagages are typically worse than what you could get with a fixed or discounted mortgage. Therefore, the flexible option is only worth it if you have substantial savings in comparison to the loan. Otoh, my mortgage rate (fixed) is lower (although only marginally) than the rate I get on the wife's and my cash ISAs.

fast bloke

hmmmm - maybe you don't have the same sourcing tools that I do, but Abbey are currently offering an offset mortgage at the same rate as their best free remortgage deal. (£499.00 arrangement fee, but you can make this up in no time if you play your (0% credit) cards right. )



Vipa - I'll let you off this time as you are fairly new.... I am one as well. Watch out, there are a couple of compliance people on here