Should I direct more into my mortgage?

delmar39

Recently joined this thread and been allocated a number – exciting! I can currently afford to pay between £50 and £75 per month in OPs and I'm trying to up this over time.

I have a question. I currently save as follows:

• £25 into an ISA (Total so far £6510).
• £10 into a S&S Tracker ISA (Total so far £3,500ish).
• £69 into a Police Mutual account (mature each year from 2011).
• £50 into an on-line account for slush fund to cover car service and other 'one off' payments.
• Plus pension payments.

In total, between me and the OH we have around £15k in savings for a rainy day. Not saving for anything specific just like to have it there.

Do you think I should reduce any of the above monthly payments in order to increase my OPs?

My first Police Mutual matures next year and should give me around £2.5k. Perhaps some could go to the mortgage? Just trying to engineer a way of paying more, without impacting on topping up my savings too much.

delmar39

delmar39 wrote: »

Recently joined this thread and been allocated a number – exciting! I can currently afford to pay between £50 and £75 per month in OPs and I'm trying to up this over time.

I have a question. I currently save as follows:

• £25 into an ISA (Total so far £6510).
• £10 into a S&S Tracker ISA (Total so far £3,500ish).
• £69 into a Police Mutual account (mature each year from 2011).
• £50 into an on-line account for slush fund to cover car service and other 'one off' payments.
• Plus pension payments.

In total, between me and the OH we have around £15k in savings for a rainy day. Not saving for anything specific just like to have it there.

Do you think I should reduce any of the above monthly payments in order to increase my OPs?

My first Police Mutual matures next year and should give me around £2.5k. Perhaps some could go to the mortgage? Just trying to engineer a way of paying more, without impacting on topping up my savings too much.

Hi there I posted this a bit a go, but unfortunately no replies. Has anyone got any thoughts / advice?

somethingcorporate

Difficult to suggest anything without knowing the specific savings & mortgage rates.

Once you have 3-6 months easy access cash stashed away, then unless you intend to save for anything in particular the risk averse part of me would say shove it in to the mortgage (unless you are enjoying very low interest on it).

HTH

getmore4less

There was no info to go on.

Whats the mortgage rate
Whats the savings rate
What deal is the mutual fund

Pension is covered(police)

WHy a S&S ISA?

Assume the job is secure so why have more £15k stashed less would do

Why not do a proper budget rather than save £50pm for stuff that needs paying.

is the £15k in ISA's?

delmar39

Hi apologies for the lack of info.

We have two mortgage products one at £126k fixed until May 2011 (4.69%) and £28k fixed until March 2012 (3.99%). I direct all overpayments into the higher % product. First fix reverts to Mortgage Base Rate in June 2011, currently 2.5% with Nationwide, so saving quite a bit, that can be used as overpayments.

I take the advice here, particularly - we have £15k stashed away so why save more. We sometimes, but not often, dip into the £15k (all in ISAs @ 2.1% currently switching to Nationwide 2.75%), so my logic is to keep topping it up just in case we dip in. Like recently, we moved house and had to take out £2k each to fund certain things. Also doing a proper budget. I do do this and the £50 per month is aimed at covering everything other than standard bills, such as car service, life insurance, MOT, annual house insurance etc - this doesn't fund general spending each month, on things like real ale (!), as just use my current account for this and budget a set spend each month. I have a S&S ISA mainly to benefit from potential higher returns. I've done quite well in the past from these, so stick with them.

I just think I've got to the point where I'm doing quite a few things, but not focusing on one - lost my aim I guess. My aim is to save, but yet OP the mortgage. OH isn't interested in putting a strategy together, so I'm kind of left to my own devices. She thinks that we've got enough saved up, but overtime, her savings (ISA) have been reduced by taking money out every now and then and then not topping them up, or topping up by as little as £10 per month.

Just looking for a re-focus in the right direction.

RenovationMan

If I were you, I would look at the sort of emergencies I was thinking my savings were going to cover and would assess my savings accordingly. Insurances cover most major things, so I certainly wouldn't be looking to have £25k in emergency savings. I have mine to about 6 x monthly outgoings.

You then have to ask yourself whether you get a bigger buzz from seeing your savings increase or from seeing your debt (mortgage) decrease. For me it's the latter, but then I do have a substantial mortgage!

As I said, if I were in your position, I would pay most of the £25k onto the £28k mortgage, stop paying into the Police Mutual & ISAs and divert all of that money and any other I could find and pour it onto the £28k mortgage.

I know your £28k mortgage is actually at a lower rate than your main one, but it's a nice small amount (in comparison to your main mortgage) and so it's an achievable target to completely pay off. Once this was cleared, I'd then make a start on the main mortgage.

As I said earlier though, we are all different and we all view life differently. I hate debt and want to clear it as quickly as possible. Over the next 3 years I plan to own 50% of my house. Once that's achieved, who knows what my next bite-sized challenge will be.

greent

I guess the Police Mutual works like SAYEs? We always used to use maturing SAYEs to OP on mtge. If returns look good on these I would personally stick with paying into the mutual accounts and use as lump sum OPS.

Keep OPs going to the larger/ higher rate mtge - we have a part mtge like you, with the smaller part on a lower rate - all my OPs are aimed at the higher rate/ larger one until I reach the annual max penalty free amount (IF I do!) and then will go to smaller mtge to remain penalty free.

£15K savings seems reasonable - but then our household outgoings a month can be £3-3.5K, so I would say that!

Not sure about the topping up of ISAs - I guess you don't reach your max annual allowance in them, then?

The 'slush account' works like mine - I budget an amount of money each month and transfer to an instant access online savings account to cover annual payments of things and take such payments (eg car tax) from this account - it's something I've done since buying my first house at 21 and has worked well for nearly 20 years

Good luck

dimbo61

At the end of the day you have £15K in savings earning 2.1/2.75% and pay 4.69/3.99% on the mortgage!
simple maths say overpay the mortgage as much as possible.
You have a good savings pot and should not have more than £16K think benefits and leave your pension/lump sum for your retirement not clearing a mortgage at 55/60 years of age. Only my views

getmore4less

delmar39 wrote: »

I take the advice here, particularly - we have £15k stashed away so why save more. We sometimes, but not often, dip into the £15k (all in ISAs @ 2.1% currently switching to Nationwide 2.75%), so my logic is to keep topping it up just in case we dip in. Like recently, we moved house and had to take out £2k each to fund certain things. Also doing a proper budget. I do do this and the £50 per month is aimed at covering everything other than standard bills, such as car service, life insurance, MOT, annual house insurance etc - this doesn't fund general spending each month, on things like real ale (!), as just use my current account for this and budget a set spend each month.

But how do you know if £50 is enough a proper budget has all these annual things itemised, you should know fairly accuratley most of them and can do good estimates for the rest(like car repairs) based on experience. You can then see the cash flow requirements of the buffer funds.

A budget should have all income and spends ballance over at least a year, and preferably over 5years with latter years approximate but close.

Updated regularly with thing that were forgotton/missed or change and you get a clear picture of how much money you have for the long term savings.

The pay yourself(set you saving spend the rest) approach only works if there is enough left to cover all the bills else you end up dipping into the savings pots.

Anyway what works for you is the way to go.

With a secure job the buffer pot can be smaller and if you are not saving from income the full ISA allowance then you can recycle some through the mortgage, ovepay from the low earning ISA and top up faster into a higher earning new one.

On the pension lump sum, I am more a believer that building up a pot of money in a tax free shelter like the ISA and using(some/all) the Lump some to reduce a mortgage can be benifitial especialy if you will be a tax payer when pensions kick is.
Somehting to consider closer to retierment or if surpluss income reaches the ISA allowances.

Benifits are unlikely with a police income and pension(can retire early) toped up with other work.

delmar39

Thanks everyone for your comments. Some food for thought. I have to say since joining this forum a year or so ago I've had some great advice, yes all slightly different, but it really gets you thinking and keeps you focused.

Getmore4less - I do itemise spend in my 'Outgoings' spreadsheet (all annual spend) and then cover this through my slush fund. However and you've picked up on this, I haven't been all that good and keeping my slush fund topped up, until now. I've built it up to where I want it to be so will see how it goes, just like greent. I/we save into another joint account for things like holidays, so my slush fund is, well, mine so my aim is to work harder at making it work. I've got a car service next week, which will be covered by my slush - I saved for it now I'm getting it done! RenovationMan - I have considered paying off the smaller mortgage product, but in just under a years time my 4.69% will become 2.5% (if rates stay the same) and the 3.99% will become the higher % product, so I'll do some re-thinking then. My aim is to merge them both when my 3.99% deal comes to an end in two years time. I try to look at it as one big debt rather than two products. Dimbo61 - your advice is sound! Based purely on rates it's a no brainer, but the more I have in savings the better I feel and I think having read all your comments and tested a few things out we have enough in savings and it's time to focus on the mortgage. I'll be building up an OP reserve anyway, which I can always buy back ;-)

Again, thanks for your advice. I'll get to work on raising my OPs and enjoy watching my mortgage go down!

P.S. greent - thanks for your advice. It seems like your situation is similar to mine and you have a similar strategy, so it's good to get your views and I guess some reasurrance.