Coud I ask for some advice please?

geri1965_2

I have a repayment mortgage with First Direct for £40,000 and my fixed deal has just ended. My new repayments are £285 which is more than manageable, however, I have savings of £12,500 (roughly) and I was just wondering whether I should do something with them (e.g. pay £10,000 off my mortgage) or whether I am better off just leaving them in an ISA.

Does anyone know if I will get a charge with FD if I want to pay some off?

tuggy

If the fixed deal has ended you should be able to pay off as much as you want with no penalties (check, but i'm sure thats right)

9 times out of 10 you are better paying off the mortage that having savings.. you need to post the interest rate on the ISA, and the interest rate on the mortgage. Are you in the 20% tax band?

geri1965_2

Yes. I don't know the interest rate on my mortgage, but the ISA is also with First Direct (mini cash ISA) so it's whatever their going rate is.

I realise the mortgage interest rate is probably higher but I worry about using up my savings in case I get a house emergency.

iieee

It's not really sensible to have no savings as you say - emergencies can happen! Unless possibly your mortgage allows you to redraw any overpayments. I've never done this though so I don't know how easy/quick it is to do.

It's usually recommended to keep about 3-6 months salary in savings, in case you were to lose your job. Any savings above this you could put towards an overpayment.

Welshlassie

Keep it in the ISA, once you remove it, its gone and you can't get the tax free savings allowance back again. You should also have a minimum of 3-6 months savings on hand should an emergency of some description happens.

Also transfer the ISA to one of Martins best buys and maximise the rate you get on it, if you enjoy seeing it grow then ensure you are getting the best rate you can.

george_jetson

have you considered a fd offset mortgage? That would allow you to have access to your savings and in the meantime it would drive down your monthly interest bill.

StuartGMC

george_jetson wrote: »

have you considered a fd offset mortgage? That would allow you to have access to your savings and in the meantime it would drive down your monthly interest bill.

I fully concur, whilst you won't earn interest on the ISA whilst offsetting you gain (usually) due to the reduced interest charged on the mortgage. Run the numbers to confirm but the offset will also allow you to overpay as well to levels you can accommodate within your budget.

I like to look at the "equivalent" interest rate when you account for interest lost on savings, current a/c which are offsetting and the mortgage capital which then incurs interest. You would be offsetting 31% so it would be very worthwhile looking. In addition, with your mortgage. I would expect your current a/c to represent a "meaningful" % of the capital e.g. if your a/c is on average £1000 it would be a further 2.5% offset on the mortgage. So, if you are always going to pay your credit card in full, simply put all your spend on it each month and pay 3-5days before due in full. You then gain from the offset and also any incentives you have on the cc (points, cashback etc).

My budgeting spreadsheet includes the offset calculation to show the equivalent rate etc. I'll PM you my e-mail so I can send a copy (you can just copy the relevant section or use to do a check on the offset even if you ignore the rest of the sheet)

Good luck and I hope you let us know your decision

geri1965_2

StuartGMC wrote: »

So, if you are always going to pay your credit card in full, simply put all your spend on it each month and pay 3-5days before due in full. You then gain from the offset and also any incentives you have on the cc (points, cashback etc).

I've thought about doing this before but never got around to it. I have 3 or 4 credit cards without any balance on them, but I don't think any of them have points or cashback. Any recommendations for one that does?