Should I Pay off my mortgage with Savings in a Bank?
If you are coming to the end of a mortgage contract and have significant savings in your bank, there are many good reasons to use your savings to pay off the mortgage debt – as long as there is no penalty for making an overpayment.
Benefits of Using Savings to Pay off Mortgage
Higher Interest Rates Interest Rates on Mortgages are typically 1-3% higher than the interest rate on a savings account. Therefore, your money gives a better return being used to pay off your mortgage debt.
Shortens Mortgage Term. Making overpayments to your mortgage, will enable a reduction in the mortgage capital meaning that the time period of the mortgage will be reduced. This will enable a large reduction in the interest debt. See: Benefits of making extra payments to Mortgage.
Reduces Risk. With a mortgage, interest payments are always subject to change with economic fluctuations, in some situations it can cause interest payments to become unaffordable. Paying off your mortgage enables greater certainty over your financial future.
Current Account Mortgage Offset Mortgage.
An excellent way to use savings to pay off your mortgage is to use a current account mortgage. This means savings are automatically used to reduce your mortgage loan and hence mortgage payments. But, this method offers greater flexibility. If you need to tap into your savings, you can – easily, conveniently and with low cost.