What to do with £7000 lump sum?

devilment

In 2006, I started a 2-year fixed rate (8%) monthly savings account with Lloyds TSB, paying in £250/month. This is due to end in October, by which point with the interest I should have approx. £7000. (For those doing the sums, you could open the account with up to £500 before the monthy payments began.) Since opening the account I have bought a house (FTB), purchase price £105,000, deposit £40,000, mortgage £65,000 discounted at 0.07% below the base rate for two years. Current monthly repayments are £381. The mortgage deal runs out in Feb 2010.

The question is what to do with the £7000?

The house I bought is currently in the process of modernisation but my monthly salary is covering the costs so far, although a new kitchen would put paid to that. I am a basic rate tax payer and have used my cash ISA allowance for this year. I am allowed to overpay the mortgage by up to £500/month, anything over that will incur a 1% penalty. Should I pay a lump sum off the mortgage and take the 1% penalty hit? Invest it in a high rate (7%+) one year bond then use it as a deposit when changing my mortgage deal thus not incurring the penalty? Shuffle it off into my Icesave account (6.3%) for easier access and to pay for work on the house?

StillTwenteen

Go on the DFW forum and give it to me :-) Would only owe £14 then :-)

Ali660

Hi there,

Just wanted to suggest moving this question over to the Savings board ... you may get more response. I would certainly be interested in any advice given as we are in the same position!

devilment

OK, so how does one go about getting a thread moved to another forum?