Using Nationwide O/P Reserve as savings pot?

essexsi_2

Hi all,

Just after a bit of clarification that I am doing the right thing.

Currently paying 2.88% on life time tracker. OP by about £260ish pounds per month that shows in my OP reserve so I can borrow back if I need to.
I have built up some instant access savings for emergencies and was looking at places to put it eg egg and AA both at 2.80%.


Would it be a sensible use of it to gradually pay it into the OP reserve and so get a better rate for it.

Is it as simple as that?!

Cheers Si

SkintGypsy

I will be interested in the answer to this, as I have the same issue really!

Thriftyknickers

We have a Nationwide mortgage and are currently on the SVR rate of 2.5%. In the past we've overpaid (currently we're filling up our ISAs which are paying a higher rate of interest) and have used this to draw down upon for car purchases etc. I've been really pleased with it and found it very quick to release the funds when needed. Don't forget when doing a comparison you need to compare your mortgage rate with any gross savings rate, unless its an ISA of course which is tax free. I'd suggest you check with Nationwide how much you can overpay (we were limited to £500/month when we were on a Tracker before moving to the SVR) and that you can 'draw down' from your overpayment pot - just in case it varies from product to product. Apart from that, effectively getting a 'savings rate' of 2.88% net on an 'instant' account sounds useful!

delmar39

essexsi wrote: »

Hi all,

Just after a bit of clarification that I am doing the right thing.

Currently paying 2.88% on life time tracker. OP by about £260ish pounds per month that shows in my OP reserve so I can borrow back if I need to.
I have built up some instant access savings for emergencies and was looking at places to put it eg egg and AA both at 2.80%.


Would it be a sensible use of it to gradually pay it into the OP reserve and so get a better rate for it.

Is it as simple as that?!

Cheers Si

I too have two Nationwide mortgages and OP on the higher rate product. I would keep OPs and savings seperate. OPing reduces your mortgage meaning you pay it off quicker. By dipping into your built up OP reserve you're cancelling out your OPs - fine if this is what you want to do. However, I'd save in one pot and OP into your mortage and ONLY dip into it if you need to. If you're saving for something or want to build up savings for emergencies then keep savings seperate. Yes, you could use some of your savings to make extra OPs and build up your reserves, but again only dip into it if you need to. I'd set a target for the amount you want to have in savings, meet your target and then focus on OPs. At least this way you have your savings pot, plus and OP reserve if you ever need to dip into it. Just the way I'd play it.

essexsi_2

Thanks for your very useful replies.

I think I was getting a bit carried away with gradually feeding in all of my savings! Just so tempting to whack it all in there!

Just to muddy the waters, I would like to move up the ladder at some point. Would this affect wether I should overpay or save. Or does it make no difference?

Cheers for your help.
Si

golfiematt

if you cant get a better net savings rate than your mortgage rate then i would stick it all in to O.P. plus its very flexible to draw back nearly instantly.

delmar39

essexsi wrote: »

Thanks for your very useful replies.Si

What do you mean move up the ladder? Do you mean housing ladder?

If so think of it this way. The more you pay off your mortgage before buying a new place the better - less mortgage = more profit towards deposit.

Yes, still save (reason for having a target whether this be rainy day savings or saving towards a new house etc etc).

Perhaps moving up the ladder will mean less money to OP with, but once you're in a new place you'll soon see what's left for OPs. I'd hammer the OPs whilst having your savings target in mind

essexsi_2

Yes I do mean the housing ladder. Does it matter where I save the deposit money, in the mortgage OP reserve or separate?

If you pay into the mortgage and then access it 6 months later, have you benefitted anymore than it being in a normal savings account earning the same interest for those 6 months?

I would like to move in maybe 2 years, so I am saving with this in mind. I am also trying to get into the habit of OPing as we all know thats a good thing! I am lucky to have a secure job with a good pension scheme. I have enough savings for the '6 month scenario' and have made use of this years ISA allowance.

Thanks for your patience. Si

delmar39

essexsi wrote: »

Yes I do mean the housing ladder. Does it matter where I save the deposit money, in the mortgage OP reserve or separate?

If you pay into the mortgage and then access it 6 months later, have you benefitted anymore than it being in a normal savings account earning the same interest for those 6 months? Si

I'm not a financial management expert I'm just basing this on what I do or would do.

I'm using OPs to clear my mortgage earlier. Nothing major, just £50 or £75 per month extra. Nothing compared to what some people on here pay per month! Overtime this will build a reserve if I ever needed it, but I will only dip into this as a last resort - it's there to keep my mortgage down. If you dip into it your mortgage will go back up accordingly so if your strategy is to pay your mortgage off then my advice would be to not touch the OP reserve.

From what you've said you've got your savings for a rainy day so you now need to think about deposit for your new place. This could come purely from the profit of your house sale, with hopefully a bit left over, if you'll make a profit that is :think:. Alternatively you could save a bit more for boosting your deposit. Our deposit came purely from house profit and we put down about 35%, but we needed to inject savings here and there for getting bits of work done.

In simple terms then, OP your mortgage with a view to clearing it and not drawing back the money you've OP'd, but it's there if you need it. Save what you need to if you need to. Like I said the more you pay off the mortgage the less it will be in the future (2 years time) meaning more profit to play with. Just my advice.

Use this calculator http://www.moneysavingexpert.com/mortgages/mortgage-calculator

I wouldn't be obsessive about OPing, just set up a direct debit for a set amount and do the same with your savings if that's what you want to do. I save more than I OP at the moment, mainly because I'm topping up savings following our house move. Once I'm sorted I'll divert more into the mortgage, but I'll never dip into this because I want to pay off my mortgage!

Sorry this is long winded, just thinking out loud as I go along

delmar39

P.S. when we took out a new mortgage to buy our new place, the overpayment reserve was lost. We had the option of getting it back, but this would have pushed the new mortgage up by the amount of the reserve. Just take this into consideration. Another reason for using OPs just to pay off your mortgage and not to save. When it came to getting our new product our mortgage was £4k less due to the amount we had OP'd so winner!

essexsi_2

Thanks very much for the detailed post. It is better when you hear how other people are doing it, that way you get real world info and can apply the best bits to your own situation.

I think you are right that I have to treat the mortgage OP as spent money, it's gone, I cannot access it. Yes of course its there for an emergency, but I have to forget about it! Otherwise I may treat it like a savings account and dip into it.

Plan of action- Keep a few hundred for emergencies, OP what I can afford to forget about and save as much as I can at the highest rate I can for my next deposit.

At least I have a plan!

Thanks very much for getting me to think about it! Cheers Si