Cash Lump sum Payment or Feeder?

Mac30

Hi Everyone

Just registered, so please be gentle. I will be receiving a Tax Free Cash Pension payment of around £50,000 in the summer and was looking for the best way to pay my mortgage off with it.........

A. I am on a tracker rate of under 3% until Oct 2012, my home is worth around £260,000 with a £110,000 mortgage. I currently pay £960 cap and int per month.

B. I am able to pay anextra 10% debt off each year under the tracker rukes so I was intending to pay £10k this summer and another £10k when the 12 month anniversary passes in October.

C. I was then conisdering having a two year mortgage free exercise, i..e out of the remaining £30k would pay the mortgage for two years from a savings account, or, option 2, when I am released from the tracker rate, just pay the £30k off the debt...........which is the best solution? Also if I did pay the mortgage monthly out of the £30k, where could I invest it to get the best rate until it is gone?

I am 49 and would like my mortgage cleared when I am around 55ish.

Cheers Mac30:)

Jock_Tight

Hi Mac30

Are you a high rate tax payer ?

If not then you could get 4.00% apr (3.14% net) on £21000 with Lloyds TSB if you have 3 of their Vantage accounts. To get this you need to feed in £1k per month but this can come from one of the other accounts i.e V1-V2-V3-V1.

If you are married (do they pay tax?) then you could get another £21k at a good rate.

Mac30

Cheers Jock........

No I'm not a 40% tax payer and I am married; I've been checking out the NatWest One Account to store all my savings so that interest is paid off the mortgage.

The Lloyds Bank deal you refer to, do you get the same interest rate if you are withdrawing each month? i.e. to pay the mortgage?

Thanks for the reply :T

Jock_Tight

Mac30 wrote: »

The Lloyds Bank deal you refer to, do you get the same interest rate if you are withdrawing each month? i.e. to pay the mortgage?

Thanks for the reply :T

The Vantage account is a current account so easy access and no problems with withdrawing each month. To get the 4% you need to have between £5000 and £7000 in the account and feed in £1000 per month. As I said in the other post the £1000 does not need to be 'new' money, many of us on this site simply move money from one account in and out again (within seconds) and it counts. So if you have 3 (or 6 set up with your wife) then online you could do V1-V2-V3-V4-V5-V6-V1 and get 4% on £42000.

This would net you ~£110 per month interest. You would need to move this out of the Vantage accounts if they are at £7000 each as you get 0% interest on anything over £7000. You could transfer the interest to say a Halifax Web Saver (2.5%) or maybe a Halifax ISA Direct Reward (2.8% net).

Mac30

Wow, and double Wow, this seems perfect, thanks for this Jock, this is EXACTLY what I will do and the interest will pay extra off the mortgage too.........cheers Matey

dimbo61

You are on a tracker rate at 3% and rates may well go up so if allowed pay the 10% £11,000! off as soon as you get the payout.
If you can follow Jock tight,s advice and put the remaining £39,000 in the lloyds vantage accounts until next summer when you can pay off another 10% just before your fix ends in october 2012