Should I pay off the mortgage or not?

[pinknailvarnish1]

Next year my current mortgage rate ends. It's currently 1.54%. The balance outstanding when the deal ends will be circa £20k. If I remortgage, I think the rate will go up to about 4%. It doesn't affect the repayments that much, as they are low anyway.

I currently have enough in my ISA to repay it in full, and have been planning to do this.

Am I overlooking anything? Is there any reason I would be better to just keep the money in my ISA (which pays 4%) and remortgage at 4%?

If I did repay it, I'd have about £30k left in the ISA, with a few lump sums due in 2028 from pensions to top it up further, so it still feels like there's enough cash there.

Am I missing anything oh wise ones?

In your circumstances I’d agree it makes sense to repay it before it switches to 4%. You’re unlikely to get much higher than that in a saving account.

This was my thinking too. I mean, I could keep it going, but I'm not sure there's any point once the rate matches the savings rate.

You’ve also mentioned that you will still have savings so won’t be leaving yourself with nothing. Go for it, well done!

Yes I think there’s only a point to holding onto savings if the IR is high and the mortg rate is low and just a simple case of maths to see what’s most beneficial in terms of losses and gains.

For you, def given the mortg rate will be on a par with savings soon , best to just demolish that balance. Be mindful of any early early repayment penalties though!

Given your low outstanding amount I’d repay and close the mortgage.

The only thing is that you'd be taking the money from an ISA, and you can't get that tax free amount back (for prev years).

I would take this opportunity to try to save as much as you can between now and then into the best rate accounts (ISA or not) as a way of offsetting this.

How old are you / what is your pension provision like and when if your current mortgage rate due to end exactly?

Option 3...
You have approx 50k in a cash isa at 4%
And 20k mortgage debt which will be at approx 4% when you remortgage

In your shoes I would:
Open a stocks and share isa and transfer £20k into it. Invest in an index linked global tracker. That should give you around 8% interest

Remortgage 20k at 4%

Keep 30k in the cash isa as an emergency fund

Put your 2028 lump sums in your S+S ISA

That 8% interest on an index linked global tracker sounds too good to be true...

I’ve had S&S ISAs for years - my time weighted return (annualised rate) is currently 7.3%, so that’s totally in line with my experience.

It really isn't. That's the historical average. I'm currently getting around 12% over a few different index linked funds.
It's a long term way of saving money, you have to ride the bumps out. Like in April (Trump's tarrifs upset the apple cart), the markets dipped and if I had emptied the account at that point I would have lost money. But I didn't, I left it alone and it recovered and started growing again by June.

I would suggest just to try with even just a few hundred for a few years to prove to yourself that it's safe and earns more than cash savings.

I was under the impression a mortgage minimum was £35 or £45k
With just £20k left you may be in personal loan territory which would be a higher APR

Happy to be corrected

Pay off your mortgage. It is so liberating. Each month you will have more money left over that used to be mortgage money. You can always top up your ISA with that.

@Didsomeonesaydogs and @LighthouseTeaCup

I'm going to give it a go!

Shoot me down if I'm wrong but I thought it was worth keeping a tiny mortgage because with an active mortgage, the lender remains listed on the property’s title. This will help reduce the risk of property fraud or an illegal transfer attempt, as the mortgage provider must be involved in any transaction

That rings bells @meetthegrahams. I did 'a thing' on the land registry website to alert me if anyone tries to make changes.

This is the proper explanation of what I meant:

https://www.gov.uk/protect-land-property-from-fraud

@LighthouseTeaCup@Didsomeonesaydogs how do you do this? Do you need to know what to invest in? I have a couple of thousand doing nothing that I would like to invest but I don't know how.

You can either walk in to your bank and ask them, or you can do it yourself via an online platform like trading 212, or fidelity, or similar. To do this you'd download their app and create an account. Transfer in your money. Then you need to buy investment(s). These platforms have educational articles and videos to help you understand the process and the risk /rewards etc. An example of an index link fund would be Vanguard FTSE Global All Cap, so you'd search for that for example and buy into it. But you need to reasearch the fund(s) you choose - look at any costs it has and how it's performed historically

If your mortgage is still a mutual i would keep a snall balance incase they privatise. Also it depends on your davings. I would not leave myself with no savings incase of emergency.

If you can get fixed isa rate same as mortgage
I’d remortgage because when mortgage clear that isa money will still have tax free isa status to be added to other savings