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  • FIRST POST
    • anon fisherman
    • By anon fisherman 6th Oct 16, 6:15 AM
    • 40Posts
    • 4Thanks
    anon fisherman
    what to do with 12500
    • #1
    • 6th Oct 16, 6:15 AM
    what to do with 12500 6th Oct 16 at 6:15 AM
    Me and my wife have 12500 between us sitting in a santander 123 account, interest rate soon to be dropping to 1.5%, we have a mortgage at 3.69% and about 2000 debt on a loan, similar sort of interest rate.

    My wife would like to do a 7.5k 10% cap rep on our mortgage when the 123 rate drops and maybe even clearing the loan leaving us with about 3k in savings. (we can then save 1k month) The obvious thing seems to pay down debt but I do enjoy having some savings after spending most my life living hand to mouth.

    Is there any other suggestions?

    p.s i feel like the powers that be just want to cut rates so i'll just spend my money in the economy
Page 1
    • bowlhead99
    • By bowlhead99 6th Oct 16, 7:30 AM
    • 5,107 Posts
    • 9,038 Thanks
    bowlhead99
    • #2
    • 6th Oct 16, 7:30 AM
    • #2
    • 6th Oct 16, 7:30 AM
    mortgage when the 123 rate drops and maybe even clearing the loan leaving us with about 3k in savings. (we can then save 1k month) The obvious thing seems to pay down debt but I do enjoy having some savings after spending most my life living hand to mouth.
    Originally posted by anon fisherman
    Paying down the mortgage or settling the loan effectively 'earns' you a tax free income of almost 3.7% which is better than any other risk free option.

    However, having only 3k savings remaining, is what stops it being an entirely risk free option. If you suddenly need 5k for a new boiler or new roof or to support you during unemployment or ill health, you are out of luck, and needing to borrow. And it is never good to need to borrow if the reason you want the loan is because you don't have any income - lenders don't like that, for some reason

    So, a decent emergency fund should be in place even if that 'costs' you something in terms of not getting a great interest rate on it. As you say, it is nice to not be living hand to mouth and properly in control of your affairs and decisions rather than being up against a budget. It improves quality of life. But no real need to have a 2k loan when you have over 12k in the bank, so get that paid off sharpish, it's a quick and easy 'win'.

    One factor to pay off the mortgage faster is if, by paying down the mortgage, you can qualify earlier for a better loan-to-value threshold and remortgage the whole lot onto a lower rate (i.e. cutting the interest bill on the whole mortgage rather than just cutting out the interest cost on the few thousand pounds you paid off). Weigh that up against the alternatives because in the current low-interest environment the long term cost savings of moving to a better rate on the whole balance (maybe even with a different provider) may outweigh the early repayment penalty.

    p.s i feel like the powers that be just want to cut rates so i'll just spend my money in the economy
    Yes it is almost like they are using a well-established tool of monetary policy to help the world go round and stop the economy stagnating which would hurt us all...
    • TheShape
    • By TheShape 6th Oct 16, 10:01 AM
    • 435 Posts
    • 215 Thanks
    TheShape
    • #3
    • 6th Oct 16, 10:01 AM
    • #3
    • 6th Oct 16, 10:01 AM
    Why not hold some more of your money back in savings/top paying current accounts. TSB and Nationwide have accounts paying 5% (subject to minimum pay-in). You'll be able to save more than 3000 between you. With Nationwide, you can access the 5% regular saver too for ongoing saving.

    If your 2000 loan is at a higher rate than the mortgage you might want to clear that first. It would also be one whole loan/product cleared so less to think about.
    • Dan83
    • By Dan83 6th Oct 16, 11:17 AM
    • 635 Posts
    • 256 Thanks
    Dan83
    • #4
    • 6th Oct 16, 11:17 AM
    • #4
    • 6th Oct 16, 11:17 AM
    Do you want to save or invest?

    You can save all your money at 5%, which is higher then your mortgage rate. You will have to check your loan rate.

    While you can save at a higher rate then you are paying on your mortgage, I would consider saving rather then paying a lump sum off your mortgage.

    The accounts you need to save 12,500 at 5% are
    3 X TSB accounts in your name, partners name and joint 2000 in each.

    3 X Nationwide accounts, your name, partners name and joint. 2500 in 2 accounts and 1500 in the other.

    Every month transfer the interest to the account that isn't full. Or don't fill any account and let the interest build up, which is probably easier.

    Read the T&C's and meet the minimum pay ins each month and check if there is any switch bonus to get with TSB, nationwide have a recommend a friend offer, with abit of work you could earn a few extra hundred pounds.
    • teddysmum
    • By teddysmum 6th Oct 16, 5:00 PM
    • 5,812 Posts
    • 3,430 Thanks
    teddysmum
    • #5
    • 6th Oct 16, 5:00 PM
    • #5
    • 6th Oct 16, 5:00 PM
    Do you want to save or invest?

    You can save all your money at 5%, which is higher then your mortgage rate. You will have to check your loan rate.

    While you can save at a higher rate then you are paying on your mortgage, I would consider saving rather then paying a lump sum off your mortgage.

    The accounts you need to save 12,500 at 5% are
    3 X TSB accounts in your name, partners name and joint 2000 in each.

    3 X Nationwide accounts, your name, partners name and joint. 2500 in 2 accounts and 1500 in the other.

    Every month transfer the interest to the account that isn't full. Or don't fill any account and let the interest build up, which is probably easier.

    Read the T&C's and meet the minimum pay ins each month and check if there is any switch bonus to get with TSB, nationwide have a recommend a friend offer, with abit of work you could earn a few extra hundred pounds.
    Originally posted by Dan83

    The problem is that these incentive rates, with the exception of the Nationwide 12 month fix, could soon drop, so the comparison may reverse, making the mortgage interest the more expensive.
    • Dan83
    • By Dan83 6th Oct 16, 6:05 PM
    • 635 Posts
    • 256 Thanks
    Dan83
    • #6
    • 6th Oct 16, 6:05 PM
    • #6
    • 6th Oct 16, 6:05 PM
    The problem is that these incentive rates, with the exception of the Nationwide 12 month fix, could soon drop, so the comparison may reverse, making the mortgage interest the more expensive.
    Originally posted by teddysmum
    When that happens, pay the lump sum. I can't speak for every mortgage, but I can pay a lump sum off at any time.
    • anon fisherman
    • By anon fisherman 7th Oct 16, 6:23 PM
    • 40 Posts
    • 4 Thanks
    anon fisherman
    • #7
    • 7th Oct 16, 6:23 PM
    • #7
    • 7th Oct 16, 6:23 PM
    Thanks for the replies, Dan the only thing is, does that not become a pain in the butt juggling six accounts?
    • YorkshireBoy
    • By YorkshireBoy 7th Oct 16, 6:41 PM
    • 28,292 Posts
    • 16,114 Thanks
    YorkshireBoy
    • #8
    • 7th Oct 16, 6:41 PM
    • #8
    • 7th Oct 16, 6:41 PM
    Thanks for the replies, Dan the only thing is, does that not become a pain in the butt juggling six accounts?
    Originally posted by anon fisherman
    Once you've paid off the loan you won't need 6 accounts...only 5 are required to house the remaining 10.5K

    You'd fill them below the max balance for interest along the lines of 1,900 in each of 3 TSB accounts (total 5,700) and 2,400 in each of 2 Nationwide accounts (total 4,800).

    You'd then set up some 500 monthly SOs at TSB as follows:

    TSB1-->TSB2-->TSB3-->TSB1

    You'd then set up some cross-firing 1,000 monthly SOs as follows:

    TSB1-->Nationwide1
    Nationwide1-->TSB1

    TSB2-->Nationwide2
    Nationwide2-->TSB2

    And then you'd sit back and do nothing for the rest of the year other than checking you're receiving nearly twice the interest you were at Santander...oh and of course kicking yourselves for not doing it sooner!
    Last edited by YorkshireBoy; 07-10-2016 at 7:17 PM.
    • bigfreddiel
    • By bigfreddiel 7th Oct 16, 7:51 PM
    • 4,072 Posts
    • 1,865 Thanks
    bigfreddiel
    • #9
    • 7th Oct 16, 7:51 PM
    • #9
    • 7th Oct 16, 7:51 PM
    I thought you could only have one TSB account. When did the rules change?
    • YorkshireBoy
    • By YorkshireBoy 7th Oct 16, 8:01 PM
    • 28,292 Posts
    • 16,114 Thanks
    YorkshireBoy
    I thought you could only have one TSB account. When did the rules change?
    Originally posted by bigfreddiel
    See the first 4 words of the OP.
    • anon fisherman
    • By anon fisherman 11th Oct 16, 12:58 PM
    • 40 Posts
    • 4 Thanks
    anon fisherman
    thanks for all the replies. I will keep you posted with what i decide to do! holiday this weekend so will be after that now.
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