Money in savings or Pay off mortgage

India_Rose

Help!!!!

I have some money that I don't know what to do with, everyone seems to want me to put my money into savings (yes they are all savings advisors) but something tells me to put it on the mortgage, I just can't decide.

My mortgage is currently £75,000 over 18 years and my house is worth £200,000, our mortgage rate from the end of March will be 2.58%.

I have £30,000 to do something with.

I have no other debts, I always go by the rule that if you can't pay for it you don't have it, thats why the mortgage screams out at me as I don't like debt.

I think I am just confused also as to what to do if I did put the money on the mortgage, do I reduce the payments and also overpay or should I reduce the term???? all too much to think about.

cabbage

depends really. Its always nice to keep something for a rainy day but if the mortgage interest is higher than the savings interest you could earn then it makes sense to pay off some of the mortgage. I think the answer would be to pay some off the mortgage and then invest the other by maybe locking some of it away and keep something back for emergencies.

I'm sure someone will be along with more ideas.

Sepa74

Well, it's a nice dilemma to have!

Have you thought the eventual use you might put the money to? Is there anything you are saving up for, or might want to do over the next 5, 10, 15, 20 years that the money might be useful for?

This will have a big impact on what you do with it and how long your are willing to lock it up for.

spandles

My advice would be to make sure you have your emergency fund (3months salary), all your credit cards are paid off and then pay off the mortgage. Make sure you don't incur any charges though!

You can then continue to 'pay' your mortgage into a savings account!

Rates are probably going to start going up soon so its better to have higher rates on your savings than the mortgage.

Have you worked out how much interest you would be paying if you paid your mortgage for the next 18 years - it's frightening.

puddpudd

My mortgage ends dec 2014. I owe £45000 in interest only. After using endownment of approx £17000 I will have £28000 to pay off. I wonder as my interest at moment is variable 0.79% I can make some money on saving this amount I have in savings of £28000?:eek:

Sepa74

Hi PuddPudd,

That is a very low interest rate and you should be able to get a higher savings rate. I'm sure there is lots of advice on the savings board, and Martin reports regularly on the best savings products.

Good luck with it all!

SeriouslySeekingtoSave

I agree with Sepa; chances are very good that you would be able to get a better rate in saving for at least some of the money. Look at it like a basic math problem. Money in savings earns me this much after tax (if it isn't an ISA). If it's higher than your mortgage rate, save it. But keep a wary eye out for interest rate rises - it needs to either rise with the rates or be readily available without a big penalty if the mortgage becomes more expensive in the future.

roger_ramjet

India_Rose wrote: »

Help!!!!

I have some money that I don't know what to do with, everyone seems to want me to put my money into savings (yes they are all savings advisors) but something tells me to put it on the mortgage, I just can't decide.

My mortgage is currently £75,000 over 18 years and my house is worth £200,000, our mortgage rate from the end of March will be 2.58%.

I have £30,000 to do something with.

I have no other debts, I always go by the rule that if you can't pay for it you don't have it, thats why the mortgage screams out at me as I don't like debt.

I think I am just confused also as to what to do if I did put the money on the mortgage, do I reduce the payments and also overpay or should I reduce the term???? all too much to think about.

If it was me, I'd probably do a three way split. £10K remain in savings, £10k off the mortgage and another £10k into a stocks and shares ISA. Furthermore, I'd drip-feed it over the course of a year, eg - £800 per month coming out of the savings pot as a mortgage OP and £800 into the ISA - that way you can continually update the situation and adjust if circumstances dictate.

Giraff

You could always switch to an offset mortgage so you will keep your savings and pay less interest on the mortgage. That way
Mortgage will be paid quicker and you keep your savings!:money: