Saving v paying off mortgage?

[OffTheCoffee]

I have c. £30K in regular saving accounts and a great big mortgage of £160k. Would you use some of the savings to pay off a bit of mortgage in my position?

Thanks in advance

Pay it off the mortgage. Your bank might have an online calculator to show what early lump sum repayments will do to the life of your loan and the total interest you pay - it is STAGGERING.

Your money is probably not even keeping pace with inflation in a regular savings account.

If you like the idea of having access to it, see if your bank will refinance you with an offset mortgage.

agree with ninedragons, paying it off the mortgage will give you a far better return in terms of reducing the amount you ultimately owe. There's a calculator showing the benefits of repaying your mortgage on moneysavingexpert dot com.

I'd probably keep a little back as a rainy day trip to florida fund, but I'd put most of it against the mortgage.

We have a One Account where your savings and mortgage are all in the same pot. Effectively you are reducing your mortgage but you still have access to it with teh draw down facility. I don't think you get such a good interest rate, but it suits us at the momemt.

I would pay of some of the mortgage, but do keep some in your savings account in case you need emergency money. Hopefully once you pay some off your mortgage payments will drop a bit, but if you keep paying the higher original installments (which I assume you can manage financially) then the mortgage will go down even faster.

Ask your mortgage company about the terms - if we overpay ours it reduces the interest but is kept separate so we can get it back if we ever wish to.

Thanks - that's kind of what I thought, but it always seems to be so much harder to be sensible with your own money!

We've paid off one of our two mortgages, down to £1, we don't get charged interest. But until the term is up we can draw down some of the money. We have also overpaid the other one, so can go to reduced payments or draw back some money anytime.

You do need to keep some for emergencies, a few months income worth is normally suggested.

I guess financial people would ask you what's the interest rate on your mortgage and what rate can you get for savings?

I would probably pay most of it off the mortgage and keep £5k or £10k in savings.

Our mortgage is currently 1% so we are paying 4x our monthly payment. If we continue to do so (and the rates stay low) it will take us mortgage 6 years to pay off instead of 19.

It depends on what interest rate you are paying on the mortgage and what you are receiving on the savings. I'm guessing at the moment you are paying more than receiving.

BUT my dh and I always try and keep a years worth of interest payments in the bank just in case dh loses his job. It is better to be able to service the debt for a year than not.

everything you need to know

like others have said. keep maybe £5k aside and overpay the rest. check your terms though, some have penalties if you over pay more than 10% in a year.

Can you switch to an offset mortgage -- that way you can keep your savings in one pot, you don't get interest on your savings but instead you won't pay interest on that much of your mortgage. We've had an offset for a couple of years now and love it.

hmm tax free interest by paying off your mortgage you will lower your mortgage repayments and you will eanr yourself more that way htan trying to keep £30k worth as it is going down rapidly with you needing the money earning around 6.5% interest - if you are get 6.5% interest on the 30k then you are fine not to pay off your mortgage

Depends on your mortgage!

We can make over payments on ours (without penalty), they are noted seperately and we can draw them back at any time with about 3 days written notice.

We def save more in interest than we could ever earn in an instant access savings account!

We also keep our repayments the same and reduce the payment term rather than reduce the monthly mortgage payments IYSWIM.

As a rule of thumb, you should keep the equivalent of 3 to 6 months income in an instant access deposit account. Then yes it might make sense to reduce your mortgage with what's left.

Funny, I was just reading something about just this today and discussing it with DP. As the others have said, I think you'd be better off paying off some of your mortgage, while keeping back an emergency fund.

If you are thinking about moving/remortgaging any time soon, paying off more of your mortgage now will give you a better ltv ratio, so that you may qualify for better mortgage deals.

It largely depends on your interest rate. If you've got a tracker set up pre credit crunch you might be on about 1% interest which you can beat elsewhere, particularly if some of your money is in ISAs etc.