Release equity to invest in short term savings

StrawberryJam_2

There maybe others in the same position http://forums.moneysavingexpert.com/showthread.html?t=1290165, however this thought is in my mind

I could release 10k equity from my HSBC mortgage (currently sitting 3.24%) and simply put it into a esaver with A&L that nets 4.65%. While keeping my mortgage term the same, and allowing my monthly payment to increase/

is it as simple saying I will be £141 better off in the year (assuming rates stay same?) (10000 * 0.0141 = £141)

the only drawback I can see is the 3-5 days transit loss of interest when I decide to return the money to the mortgage. Any other benefits, or drawbacks that I should be aware of?

Or should I just leave the mortgage as it is, as my ultimate aim is to pay the mortgage of sooner rather than later, however in the current climate it is better to save than overpay.

Shall i juggle money between my mortgage (debt) and savings (to benefit)

arcalis

Since the 1.5% reduction this was on my mind also.

My quandry, like yours, was simply that my goal of being mortgage free would be complicated by increasing the debt that i have been overpaying on for the lasy 2 years. My lump sum i have offset against it plus the releasing of some of the equity (which won't cost anything other than the 3.75% interest rate) will be put to better use in an account with a higher rate.

I assume your mortgage, like mine SJ, is a tracker. So the main risk would be if rates rose again. I applied for a six month fixed bond at 6.97% and i am ummmming and arrrring on how much to put in as i'm not sure i've thought out all the cons.

silvercar

Unless you are saving in a tax free vehicle, like a cash ISA, remember to conside the net savings amount rather than gross.

I thought of moving some offset savings to an account with the same building society, so I would be guaranteed that my money would only be not earning interest for 2-3 days. After taking tax off the savings account, the interest rate was identical to the mortgage rate.

Also consider what happens at the end of the fixed term savings rate. You will have to allow a few days of lost interest to transfer the money back to the mortgage or to another rate elsewhere.

The day the interest rates fell, I applied for a Birmingham Midshires fixed rate cash ISA online. Payment is by cheque, so I immediately transferred the money from my mortgage savings. Its now sitting in my current account earning next to nothing whil I wait to receive the paperwork to send with my cheque.:(

StrawberryJam_2

arcalis wrote: »

I assume your mortgage, like mine SJ, is a tracker.

Yeah I have a tracker mortgage at BOE+0.23. I wanted the flexibility to overpay as much as I like. But all this year it has been better option to save money as opposed to pay off the mortgage. with the recent drop of 1.5% on my mortgage, thankfully the savings has only dropped by 1% or thereabouts.

Savings net interest is 4.65 on the A&L esaver and this is flexible to withdrawals (with a few conditions - ie loss of interest on any withdrawal in that month, therefore withdraw it on the 1st of the month to lose no interest)

Has anyone released equity (Im not sure how much I can release for that 'home improvement') and put it into savings.

Anyway, I shall not be overpaying my mortgage for now. anyone who does over pay a mortgage is silly i think... as you are getting better returns on savings, and thats where my additional payments are being place into. When the day comes that mortgage rate inreases I will have a lump sum to pay from my eSaver.

chardir

Even if you have an overpayment reserve you might not be able to simply take back the 10k. There might be fees attached or you might have to borrow it at a higher rate.

I agree though - cancel your overpayment and switch it to a savings account.

StrawberryJam_2

chardir wrote: »

might not be able to simply take back the 10k. There might be fees attached or you might have to borrow it at a higher rate..

This is good point, I will do a little further research on this. It had not crossed my mind. Thanks!