saving rather than paying off mortgage

real_sunfire

Hello everyone,

We are in a interesting position and would like some advice.

Background:
We returned to the UK at Christmas after living abroad. I've managed to find work but I have a 6 month probation period so am unable to get a mortgage yet.

Instead my parents in law lent us some money off their interest only tracker mortgage to buy a house. Now this is currently tracking at 1.5%. We are paying the monthly interest but are putting money aside for capital as the inlaw's mortgage does not allow monthly capital repayments. Currently this money for capital is going into a savings account which is paying 6% (about 4% after tax?).

An interesting poistion where our savings are at a higher rate than our debts.


My question:
Should we continue to put the money we set aside for the capital into this savings account or should we try and make capital repayments when the mortgage allows?

Thanks,
Nick.

shirlgirl2004

Hi Nick

We've done exactly that. Our mortgage is totally offset by savings which even after tax means we get a better rate than we pay on our mortgage. I suspect by the time your in-laws can make OP without penalty interest rates may well be on the rise and it would be practical to keep an eye on both the rate you are getting and what is being paid on the mortgage. As long as after tax you will be better off with savings then it is prudent to keep them. Regardless you should have a contingency fund in case you lose your job or have another emergency requiring quick funds.