Repayment dilemma for homeowners

Mark Welborn: Should he pay off mortgage?

The recent rise in interest rates means mortgage repayments take up an even bigger chunk of monthly income.

In the long term, that adds up to a lot of extra cash, especially if you're just starting out on a 25-year loan.

So is paying off part of your mortgage a sensible way to reduce monthly payments and save cash in the longer run?

That's a question facing Squadron Leader Mark Welborn, who has been in the RAF for 10 years.

He's now based in Buckinghamshire, but owns a house near York, which he lets out.

His mortgage is for £64,000 - he has an underperforming endowment which won't pay off thre whole amount.

Mark also has a reasonable amount in savings, such as Premium Bonds and building society accounts.

"I'm cautious with money," he says. "I don't buy gadgets like my colleagues do - you won't find me with the latest video or DVD.

"Should I be looking to pay off my mortgage now or to keep it all in savings for a later time?

"When I took out the mortgage the advice was never pay off your mortgage, get the biggest mortgage you can and put down the smallest deposit you can."

Christine: Full tax relief

Christine Ross of SG Hambros says paying off a mortgage as quickly as possible is normally the most sensible course of action.

But if you have a buy-to-let property, there can be other options.

"You can deduct your mortgage interest payments from your rental income and effectively that gives you full tax relief on your mortgage," says Christine.

"You could then afford to keep money on deposit, pay the mortgage interest and still be better off by 1% or so."

But she says it's also important to think about the future if you plan to have no mortgage.

"If you're out of work or have a period of unemployment, until you get another job it's really difficult to borrow."