Repay mortgage tracker or save? Help!!

Crazy_chick

Hi everyone,

Until a couple of days ago I was convinced the best thing was to use some or my savings (~£10k) to pay off some of my mortgage, but having read the advice in Martin's "Should I repay or save" article now I am now so sure .

Basically I am on a tracker mortgage at BR + 0.36% (so currently 0.86%). I have just opened a savings account guaranteed 2% above BR (currently 3%), so my question is should I repay some of the mortgage or just stick the money into the savings account?

I have about £97k left on the mortgage and about 22 years I think.

Thanks!

sheslookinhot

It's always worthwhile keeping some savings for the unexpected. If you have more than enough for this, its always nice to see the mortgage debt coming down.

Trying_to_be_good

Also, make use of your cash ISA allowance before using other savings accounts - the tax-free wrapper will still be there when you've managed to pay off your mortgage.

If you haven't used this year's allowance that's £3,600 before 6 April and another £3,600 after 5 April, so £7,200 (per person over the age of 16) within the next month you could stash away earning tax-free interest.

Crazy_chick

No I haven't used my ISA allowance yet, am planning to open one before the deadline but just struggling to find the best one!

cocktail

Crazy_chick wrote: »

Hi everyone,

Until a couple of days ago I was convinced the best thing was to use some or my savings (~£10k) to pay off some of my mortgage, but having read the advice in Martin's "Should I repay or save" article now I am now so sure .

Basically I am on a tracker mortgage at BR + 0.36% (so currently 0.86%). I have just opened a savings account guaranteed 2% above BR (currently 3%), so my question is should I repay some of the mortgage or just stick the money into the savings account?

I have about £97k left on the mortgage and about 22 years I think.

Thanks!

i am in a similar situation as you. i used to firmly believe in overpaying but recently i am more inclined towards saving rather than overpaying to build up my 6 month reserves.
My interest after tax is definately more than my mortgage interest at the moment and it is likely that the rates will remain low for some time. this will however need a constant check as when the rates increase in the future i may have to do the reverse and pay off some of the mortgage. however i should by then have a good chunk of cash that i can repay.
BTW who is offering 2% above base rate? looks good

mothershipton

if you are getting more interest stick the money in your savings account, interest rates have only got one way to go now ! when the rates on your tracker rise move the money ! Im the other way round mortgage is 5.8% !

Crazy_chick

cocktail wrote: »

BTW who is offering 2% above base rate? looks good

It's Sainsbury's bank, a limited offer. HTH!

Thanks for the advice everyone, looks like I might bung it all in savings then...

shirlgirl2004

Bare in mind that you may have to pay tax on the interest at upto 40%. Have you used Martin's calculator which tells you the savings rate you would need to get to make saving worthwhile?

Crazy_chick

shirlgirl2004 wrote: »

Bare in mind that you may have to pay tax on the interest at upto 40%. Have you used Martin's calculator which tells you the savings rate you would need to get to make saving worthwhile?

Yes I have, and it said the savings rate I'd need is 1.1% ... so if I can get 2-3% that's what made me think twice

Suekc

Hi this is really useful thanks .I am in a similar position . Endowment just matured -have 20K to pay off mortgage currently tracker at 0.18% above basic rate now 1.18% ( rest of mortgage is repayment 72k finishes in 2016 all other debts cleared ) need savings above 1.5% according to Martins calculator but feeling really wobbly, never had this kind of money to manage before and of course will still need the lump sum at the end of mortgage term .considering fixed rate bond for part of it for 1 yr and keep some instant access perhaps using ISA ?????? would appreciate any thoughts / other things to consider. cheers

sammyjammy

Suekc

Your rate will now be 0.68%, the base rate was moved to 0.5% on Thursday.