Advice on maximising short term interest

PThomas_2

We are currently planning an extension to our family home, this will require us to borrow an additional £35,000 on our mortgage.

The extension will be project managed by myself to help keep costs down. I expect the project to take approximately 6 months to complete.

What can we do with our money in this time to maximise any interest on it? It will still need to be readily available to make payments to builders, suppliers etc.

Hereward

I assume from your post that you are looking to save the borrowing until the bills come in. If this is the case you would be better a looking to find a flexible loan that enables you to draw the funding as it is required rather than taking the full amount from the outset. Using this method would save you more money in the long run as the rate you get on your savings is likely to be less than you could achieve in a savings account.

Debt_Free_Chick

If you must draw the capital down in a lump sum, in advance, look at a Cahoot savings and current accounts. You can pay the bills out of the current account and just transfer enough to cover each bill from the savings account. Transfers appear online immediately, so no hassle with having to make a transfer 3 or 4 days ahead to get money into a current account.

Cahoot rate of interest on the savings account is pretty competitive - albeit not the best.

PThomas_2

Sorry I didn't give enough information.

Yes we plan on getting the funds up front and are looking for a way to maximise any interest on it before we pay it out.

My wife is currently a full-time student so maybe we can avoid paying the tax if it is in her name?

Debt_Free_Chick

PThomas wrote:

My wife is currently a full-time student so maybe we can avoid paying the tax if it is in her name?

Yes, that should work. For tax purposes, you would technically be gifting your share to her, so it becomes HER money (and in theory, she could run away with it and you would be owed nothing).

So a savings account in her sole name would work. However, my point about a linked current account is this ... if you have a savings account at a bank or building society which is separate to your current account (the one where you will pay the bills from) then you need to allow a minimum of 3 and preferably 4 days to transfer money from the savings account to the current account. You will earn no interest whilst the money is "in transit".

For this reason, you might want to consider whether your current account bank has a suitable savings account or setting up a savings account and current account with the same bank. This way, transfers are usually instant .... so you can leave the money in the savings account for longer and transfer it across "at the last minute" ... and you don't suffer the loss of interest as the money is not "in transit".

Cahoot pays 4.55% on savings and you can have a separate current account with them.

There are better rates, but you need to consider the "in transit" point.

Regards

PThomas_2

Thanks for the reponse.

If we set up a Cahoot savings account in my wife's name and a joint current account would she be able to transfer money on-line from the savings to the current account?