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Q&A » Mortgages
Mortgage fixed rate @ 5.84% to July 2009.
Mortgage has 8 years to run.
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824What a lovely position to be in.
If you are a basic rate tax-payer and can earn 7.30% or a higher rate tax-payer and can earn 9.74% then invest the money.
If, as is more likely, you can't. then pay off as much as you can without penalty. When to do it depends on when capitalization occurs and, of course, when you are allowed to do it. If you have daily or monthly capitalization then pay off as much as you can as soon as you can. If it is yearly then over-paying before the annual capitalization date will not save any interest, so pay just before the capitalization date.
It may well be that all the answers actually come down to July 2009.
If you pay off the whole of your mortgage then you will have to get the Land Registry to record the removal of the Mortgage and you will have to store the deeds. However, if you are able to, you could leave a nominal £100 outstanding on an interest only basis and your mortgage provider would store the deeds for you. If it is a Building Society that would then also qualify you for Conversion Rights, if any, in the event of a takeover or conversion to PLC.
Posted on 05 December 2008 |
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0I suggest you read the fine print on your mortgage. The 'fixed till' date and the way capitalisation works may be irrelevent if you can simply pay the mortgage off - completely. Obviously if there are early repayment penalties then the first point MikeGG1 makes is relevant.
If your property is registered with the 'Land Registry', and well over 90% of all UK properties are now on their database, you have NOTHING to fear about 'deeds'. The 'Land Certificate' is an official copy of the register of title, and is inherently no more valuable than your 'birth certificate'; if you lose it you can simply pay a small charge and get a replacement.
Posted on 06 December 2008 | Love 0 loves
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159I agree, pay off mortgage as soon as you can do without penalty, and I also agre that you no longer need to worry about deeds unless you have a rare unregistered property. Having said that the pre registration deeds and documents if they still exist can be useful in the event of lease/boundary issues so are worth keeping hold of, but not at cost.
If you take the amount that you were paying on your mortgage and start saving it, then after 8 years you will have accumulated a tidy sum and be well on the way to paying yourself back for the use of the money to pay off the mortgage. The best of both worlds imho.
Posted on 06 December 2008 | Love 0 loves
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0It depends on your risk tolerance and your personal needs. The fact that you are contemplating 'investing' suggests you have a reasonable risk tolerance. If you will not need to use the money for, say, 5 years, I would invest it in the stock market. The stock market it hovering around its lowest levels for the past decade. Buy low, sell high.
I paid off my mortgage a couple of years ago and now think 'if only I had... '.
Posted on 06 December 2008 | Love 0 loves
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0Personally I would invest it risk free (Premium bonds perhaps?) until it looks like the property market is at its lowest, then buy a terrace house in a northern university town and enjoy the income!
Posted on 06 December 2008 | Love 0 loves
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0The final decision is yours but my own experience was that that I had a repayment mortgage and when the rate went up I paid the increse but when it came down I did not reduce payments resulting in ending mortgage 7 years early and what a wonderful feeling it was! millstone comes to mind, and as i had approx 15 working years left I invested released mortgage payment plus, now retired living comfortably and feel I acted correctly.
All the best
Posted on 06 December 2008 |
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44Are you planning to invest everything in one go, right now? That's probably not a good move (unless the investment requires a lump sum, such as buying land or a business). If you pay off the mortgage then you'll have a few hundred pounds a month to spare, which you can drip feed into an investment. The government seems intent on inflating its way through the current difficulties, so if you're likely to get pay rises in line with the inflation rate your mortgage will get reduced to nothing. You don't need to go all-or-nothing - why not pay off only half the mortgage?
Posted on 06 December 2008 | Love 0 loves
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0In the current climate it is hard to know which way to turn. The mortgage allows up to 10% over payment(of the balance) in any one year and there are fees for paying off early (approx' £1600)and an admin fee of £225. As suggested I'm not going to get 7.3 or 9.74% return on any investment just now but the stock market is low and it is tempting to look in that direction. I'm tempted to settle the mortgage sooner than later but throwing money into a house that is reducing in value every month doesn't feel quite right - over the medium term this should not really be an issue and, of course, there is allways an offset mortgage!
Anyway, quite a few interesting ideas - thank you all. I'm going to have to chew on this and crunch the figures....
Posted on 06 December 2008 | Love 0 loves
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824Does the 10% restriction not end with the fixed rate period? I suspect that you may be able to pay it off then.
However, consider how much of a reserve you might need for emergencies. Although there will be spare money to save from the payments you will no longer need to make, it is better to keep some capital back in case of an emergency shortly after repayment date.
Posted on 07 December 2008 | Love 0 loves
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0Yes, the 10% restriction will end on 30th June (when the fixed rate ends). My partner has a reserve of cash following her redundancy last year (around £5,000) which we don't use but that's also giving a poor return - probably have to look at a fixed rate before they all drop too far. By paying off in the mortgage in July we would likely save around £38,000 over the subsequent 8 years (using the current monthly motgage payments as an example!) Given the £35k won't produce much of a return in any bank or BS just now it might be wise to use the capital to at least reduce the mortgage balance by 50% or so in July - the ramining £17k could be drip fed into the stock market or even used to offset the remaining £16k of the mortgage - too many options to think about. Life was easier when I had no money!! Thanks....
Posted on 07 December 2008 | Love 0 loves
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0Since you have a large early repayment penalty, I would be tempted to put £32,000 of the £35,000 into a 6 month fixed rate bond, which will mature just before your mortgage deal ends. After your deal ends, use this to pay of the mortgage in full.
ICICI have bonds at 5.75%; you'll pay about £150 tax on the interest. However, some people have concerns about ICICI's long term stability.
After this, for investing, it might be good to pay the equivalent of your mortgage repayments (about £200?) into a Unit Trust. However, the stock market is likely to continue to fall for a while before recovering. Having said this, buying stocks when then the market is at its lowest is profitable if you have strong nerves and the companies you invest in don't go bust.
Posted on 07 December 2008 |
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0The charges involved with Unit Trusts are high, typicaly 5% on the way in and 1.5% pa of the total fund value every subsequent year.
Investment Trusts, like Alliance Trust and Foreign & Colonial, are real companies. Buy their shares online and the dealing costs will be minimal ~ with no subsequent annual charges.
Posted on 08 December 2008 | Love 0 loves
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0Dear Nawe77,
I work for ITV, and am looking for people who are using their savings to pay off mortgages with the current interest rates being so low. I wonder if you might be interested in talking to me about your experiences? My e-mail address is Emma.Slater@itv.com.
Many thanks.
Posted on 21 January 2009 | Love 0 loves
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