Savings - confused with all the options

Rygar

Hi everyone,

This probably seems like straight forward stuff but having only recently gotten out of debt for the first time in in my life I've never really had any savings. Now that I do I want to know best way to maximise them.

I've read all of Martin's articles but to be honest there are so many variables involved that my head is spinning. I would like to hear peoples advice for what to do in my circumstances....

OK so I have £8K in savings and I can add approx £1000 per month to that. No debts apart from an interest only mortgage with endowment. Money is currently sitting in a Clydesdale basic account earning no interest.

My loose plan is to save until June 2010 adding £1000 every month. By this time I will have saved £24K. I then hope to surrender or sell the endowment for approx £10K (been paying in £64/month for 14 years at that point) thus having enough money to pay off my £34K mortgage.

I want to earn as much interest as possible but I don't like the idea of money being untouchable because you never know what the future holds but I'm not tottaly adverse to this if there are big benefits to be had.

Sorry for the long post, just want to make sure I've included all details. To sum up, what should I do to make the most from my savings?

anselld

Does your mortgage allow you to overpay now?

Rygar

anselld wrote: »

Does your mortgage allow you to overpay now?

I'm not sure I will check policy when I get home & post back. Its an A&L interest only fixed deal coming to an end in April. Must admit I didn't think you could overpay on interest only mortgages?

Rygar

Seems I cant overpay the mortgage but as my tie in ends in April I dont suppose that matters too much.

Having thought about this some more I am now considering switching to a re-payment mortgage in April & paying off approx £20K straight away (with savings & endowment cashed in) I then ideally need a mortgage that allows me to overpay a lot each month and wont penalise me if I decide to pay off the lot early.

Would this be the best approach & if so who would offer me the best mortgage?

Perhaps I should be asking this in the mortgage free wanabee section but I'm not sure if saving then paying off in one go OR overpaying now is the best option? Maybe theres not much difference between both methods?

Wookey

Run a few scenario's thru the calculators to see what option will benefit you most over the term thats left on your mortgage. Off setting your 8k against the mortgage, sticking it all into an overpayment, maintaining regular overpayments or mix and matching a combination of them.

Now is the time to get onto A+L and ask them what your mortgage plan will default to once the fixed term is up and what options for a renewed fixed deal there most likely to offer you etc etc...Once you have all the relevant info then sit down and work it out. Personally i would clear the mortgage as fast as possible with about 7k of your current capital and the max in overpayments that you can afford bearing in mind that most lenders do allow any overpayments to be reclaimed should it be needed.