Should I pay off my mortgage early?

Q I have a ?50,000 mortgage with 12 years to run which I pay off at ?450 a month. I could pay off ?40,000 of this now. Would the saving outweigh the loss of interest on my capital and is this a wise move to make?



A Generally l believe it makes sense to reduce a mortgage if you have surplus funds available to do so.

Unless you have a particularly good mortgage deal the interest you pay on the loan will be substantially higher than the return you can earn on investing the money, especially after taking tax into account.

With interest rates on the way up there is an even stronger case for reducing the mortgage. However you will first have to check whether there are any penalties for paying off a large part of the mortgage at this stage.

You should also take into consideration whether you might need some, or all, of the ?40,000 for some other purpose-like buying a car.

Once you have used surplus cash to repay part of the mortgage it effectively disappears and it could be costly to raise another loan. Nevertheless the reduction in your monthly repayment from the present level may provide a useful boost to your daily income.