Build savings or chip away at mortgage

[d000hg]

Holy crap, is that what ISA's are nowadays?

I think my ISA is at 2% for direct access, I could have got 3% quite easily with some sort of lock-in but we deliberately did all we could to use non-ISA money for the house deposit so my warchest/savings IS my ISAs now so that's not an option

Paying off your mortgage isn't very exciting, but as has already been mentioned, it is equivalent to a zero risk 5 - 7% return on your money by doing so.

Well put. The only down-side is you're effectively locking the money away forever unless you have offset capabilities - sure you can claw some back with payment holidays but effectively it's in a very long term investment.

I think I shall plan to build the warchest a bit more, and then concentrate on mortgage overpayments - in theory while we're both working I can maximise both our cash ISAs and make the maximum overpayment in parallel.

[Old Hack]

Offset mortgage and you have both.

[Paddy]

Paying off your mortgage isn't very exciting, but as has already been mentioned, it is equivalent to a zero risk 5 - 7% return on your money by doing so.

Everyone's situation is different, but clearing your debts whilst you are earning and the interest costs are low means a big saving in total borrowing costs in the long term.

Who knows what your earning potential, health and borrowing costs will be in 5, 10 or 15 years time?

WDPS +1

[BankingContractor]

Agreed - best course of action is simply pay down debt and become free of the burden as quickly as possible.

Personally, I don't believe in using "surplus" cash to invest in an ISA, etc even if the rate is better.

By that rationale, once you've paid off the mortgage, would you consider taking out a loan/mortgage to invest in such as ISA if the rate was better?

This is your family home, and to my mind, some things are beyond the scope of profit.. so if it was me, pay off the mortgage and have security for yourself and your family.

That's my tuppence worth..

[Old Hack]

We've been clearing the decks for about a year to make sure we're mortgage free. It means, if anything, all of the money, is yours, all you have is the utilities and such like. But your biggest expense will be gone. You then also have a nice fat asset to either use, or sit on.

I have been both sides of the fence, Investing gambling and having debts and I can assure you, I sleep better now, knowing that's all coming to an end.

[SandyD]

In the old days people didn't bother paying off the mortgage because they didn't have much surplus money and relied on property market increasing the property value to offset the mortgage value (or in some cases makes the mortgage insignificant compared to the property value) but I am not sure in the future the property values will increase in the same way. Hence, paying off is a good option.

Like NLUK says, try so a few online calculators and play with some scenarios of offset vs fixed, even if offset mortgage % is higher, you are still saving a huge amount on the total debt.

[SandyD]

We've been clearing the decks for about a year to make sure we're mortgage free. It means, if anything, all of the money, is yours, all you have is the utilities and such like. But your biggest expense will be gone. You then also have a nice fat asset to either use, or sit on.

I have been both sides of the fence, Investing gambling and having debts and I can assure you, I sleep better now, knowing that's all coming to an end.

Heh, not sure about the utility thing, my utility bills have more or less doubled in the last couple of years !!
If you want the truth I have no idea how most retired people who are not on benefit can afford it.

[Old Hack]

Heh, not sure about the utility thing, my utility bills have more or less doubled in the last couple of years !!
If you want the truth I have no idea how most retired people who are not on benefit can afford it.

We have a lot of sustainable renewables in our place, ground source heat pump, Solar water, PV panels and it's reduced the bills dramatically. Council tax id the one I loathe paying the most...

[d000hg]

We did our budget recently and council tax + utilities + groceries are easily pushing a grand a month. Hardly free from financial pressures - our rent was only about 1/3 of our monthly outgoings.

[SandyD]

We have a lot of sustainable renewables in our place, ground source heat pump, Solar water, PV panels and it's reduced the bills dramatically. Council tax id the one I loathe paying the most...

Can you give me some information, I tried to get quotes for solar panels but the price was too high, I am aware there is ways to get them free and the companies would get the profit, but please do provide links/information.

However, in another country where the sun shines all year round about 20 or 30 years ago everyone started using solar energy for heating and water... guess what?? the government in that country decided to tax them on the solar usage, and its more expensive than installing electric, hence all new houses/flats now reverted back to using electric heating !!