What to do?

greazer

our 3yr fixed rate with nationwide is coming to an end in jan 2010, so will revert to standard mortgage rate after that, we have £20k in savings, can i put it all in at once to reduce capital or am i better overpaying each month till it is used up, house value £130k mortgage £90k. advice please.

koexelek

After your fixed rate has finished, you can pay it all of the mortgage if you want to.
Up until then, you are restricted to £500pm.

I'd say pay it all of at once, rather than drip feed it monthly, because they charge the interest daily

Joe_Bloggs

@greazer
Welcome to the forum. 20K is a nice cushion to use against changes in circumstances. The key is what interest rate are you getting on the 20K? Are you paying tax on the interest on the 20K ? There are no limits to overpayments once you are on their BMR, a rate that will track the Bank of England base rate + 2.0% that is 2.5% at present.

It would be difficult to suggest what do to with your savings when we don't know what you are doing with them already. It is not uncommon for savers to leave their savings too long in one place and become complacent with a poor rate of return.
J_B.

greazer

£10k in a cash isa, £10k in 2 standard rate current accounts

Joe_Bloggs

@greazer
What rates are you getting on your ISAs ? What rates are you getting on your standard rate currrent accounts ?
J_B.

greazer

2% on isa 1% on each current account

Joe_Bloggs

@Greazer
I am sure you can get more for your current account money if you diverted funds that were left standing to a savings account that offered a higher interest. Sweeping money from where it is not needed to where it can benefit the account holder has to be done manually as it is not in the banks interest to provide an automatic facility. The interest on this money is taxed according to the income of the account holders. It is possible to open regular savings accounts for predictable regular sums and benefit from a gross rate of 5% see MSE Martins views here.

If you can better 2.5% on your ISA then you would make more money by not cashing in your ISA towards the mortgage. ISA transfers may seem daunting at first but you don't have to transfer all of the money and can choose to split your past funds with numerous providers at competitive fixed and variable rates. See MSE Martins views here.

My Mortgage is with the Nationwide and I face the same BMR rate as you. I made it a principle of mine to overpay something each month. In the early months, it was just enough to make the total mortgage repayment a round number.
J_B.

michaelwr

@JoeBloggs
Standard life bank ISA is 2.65%, for quick access.

As you may have read make sure you use your ISA allowance first as £10k in current accounts does seem high when you could use an easy access ISA.

p.s. Transferring isn;t too hard when compared to SLB process for setting up online banking. Done via the post in separate envelopes with wierdest security questions i've seen like "where did you parents meet?"

Joe_Bloggs

@michaelwr
Cash ISAs can appear easy access but in withdrawing funds you are consuming your tax free allowance that you could have contributed to a cash ISA.
Thus deposit £1000 today in a cash ISA today, withdraw £900 tomorrow, the maximum you can deposit again in the tax year is reduced by £900. Thus the account balance would be £100 and the remaining be £3600 - £900 = £2700 is the maximum that is available to deposit given no further withdrawals.

The money may be instant access but the accesses are not without long term consequences. These may not matter if you had no intention of using all of your allowance.
J_B.