The value of cash

Chris_h_4

Background
Me and my partner are considering building a new house in a year or 2. We are therefore saving heavily to hopefully put us in a position to be able to do this. We already own a house which we would expect to sell as part of the financing.

My plan
I am conscious that throwing our savings at our existing mortgage (a capital and interest policy that allows unlimited additional payments) would provide the best return on our cash. However, my thinking is that we should hold all our new savings in cash (probably 1 year fixed ISAs / savings plans for the next 12 months then something more flexible) so that we actually have as much cash as possible in our hands when the time comes, as opposed to having it tied up in our house.

My question
Is this a sensible approach? Is there a sensible limit (perhaps based on expected cost of house build / land, say) above which new savings could confidently be thrown against our existing mortgage?

Regards
Chris

G_M

What interest rate are you paying on your mortgage? How does this compare with what you can earn after tax by saving?

Chris_h_4

Sorry for delayed response G_M...

We are paying 2.5% on mortgage at the moment. This is a permanent deal for 2% above base rate. So similar to what can earn on normal cash savings for now.

rictus123

I would say savings as this could give you a better return.