Help required : Endowment redress - overpay mortgage or invest else where

morganb

We currently have an interest only mortgage with an outstanding balance of £119000 which has another 16 years to run

We are on a 2 year Base Rate Tracker with a current interest rate of 4.89%

We have now been offered £13000 redress from a mis-sold endowment policy

What should we do with this money?

Options as far as I can see are :

1. Overpay this amount onto the mortgage now. If we do this we will incur a 2% redemption charge on the overpayment amount. However we would require less Life Assurance

2. Invest the money into a savings account / ISA until we are out of the redemption period (about 20 months to go) then overpay on the mortgage.

3. Invest the money into a high interest savings account or ISA for a longer period of time.

The savings accounts we are looking at are either the NS&I ISA (currently 5.55% max investment £3000), Lloyds regular Saver (8% for 2 years) or a Yorkshire Bank Child Savings Bond (5.5% fixed for 5 years)

Any help appreciated - hopefully this is the right forum for this post and it contains enough information.

Thanks