Mortgage v saving

torla

Hello all, sorry if I am in the wrong forum but I spent some time looking and can't find what I am looking for.

Currently I have an interest mortgage only with £69604.78 out standing. I have a flexible mortgage with a credit facility of £33953 (money which I over paid - so can withdraw any time). My mortgage interest rate is 1.49% per month and I pay £400 p/m (Average interest paid per month £90).

I read in Martin's site that That it is best to pay debts first with higher APR. As my mortgage is only 1.49% (base tracker) would it be wise to find a savings account like e-saver Santander at 3% and take my £333953 out of the mortgage and put it in that savings account? I have used my ISA allowance. Should I keep paying £400 in that account or save that as well? I like to have access to my money mostly at any time but may consider locking for one year.

Many thanks and apologies if I am in the wrong forum.

jjlandlord

I think it'd make sense, though you should take the net rate of the savings into account. You should pick a savings product allowing you to withdraw the full amount at any time without penalties to cover for potential mortgage rate increases.

Actually I know people who have mortgages with a similar credit facility with Santander and use it to invest into a Santander savings account... Santander must be pleased

TrickyDicky101

If you are a higher rate tax payer it is a very close call - technically at the moment there would be some economic benefit, but this would need to be offset against the hassle of moving your money around and reacting to interest rate rises.

torla

Thank you for both replies. I'm not a high rate tax earner. It sounds like may be best to leave things as they are. I already have some saving with Santander in the e-saver. I guess at 3% gross gives me 2.4% net? Which means I will be better off by 0.09%, if I'm correct about that. As you say the hassle of moving money (although moving it within Santander wouldn't be too much hassle - Mortgage is A&L actually) but also keep reacting to interest rate rise. I'll welcome any further suggestions

Thank you once again

dimbo61

well we dont know your age, mortgage term, REPAYMENT VEHICLE, or income so how are you going to clear the debt at the end of the term ?
If you are paying £90 interest at the moment then you are clearing £310 a month off the outstanding balance or £3700 each year
so you are looking at nearly 20 years with current balance if rates stay the same!
I think you are right to pay at least £400 a month in mortgage payments but would also try and fill your ISA allowance each year

torla

Thank you dimbo61, I am 49 years young income is £25k and the only repayment vehicle is the extra money I put in towards the mortgage and have about £16k ISA. I had a term of 25 years started dec 2006 (late starter). Would it be wise to pay more in or would it be better to save that money in say like its mentioned here 4.2% for a 5 year term (but can have on 180 day notice after 6 months if I understood it correctly) Or better stay as i am?

Many thanks to all once again

ViolaLass

torla wrote: »

... Which means I will be better off by 0.09%, if I'm correct about that...

Oh dear, 2.4 - 1.49 = 0.91, not 0.09. For nearly a percent difference, I would say it was worth it provided you trust yourself to keep a keen eye on interest rates.

torla

ps.. I used the saving calculator on this site, I typed £30k saving and £400 a month saving for a basic tax payer using the online Newcastle BS 5-Year Premier Bond at 4.2% AER I calculated I get net return interest 0f £1094.92, am I in cuckoo land or is that correct?

torla

ViolaLass wrote: »

Oh dear, 2.4 - 1.49 = 0.91, not 0.09. For nearly a percent difference, I would say it was worth it provided you trust yourself to keep a keen eye on interest rates.

opps sorry 0.91% :rotfl:

dimbo61

Same age as me ( must have been a good year!!!) and you have a good savings pot of £16K which is the most you can have and still claim benefits if you lost your job!!
They gave you a term which would take you up to 69 years of age !!!! and no repayment vehicle required
You should fill cash ISA,s earning 3% plus but I would still be tempeted to increase the IO mortgage payment while rates are low IF you can afford to even £50/100 a month would help
Good Luck you have your head screwed on

torla

thank you dimbo61, yes very good year lolI have my ISA full. This year I got 3.5% tracking the bank rate on my ISA. Increase IO you mean increase the monthly payments? OR should I increase payments on my pension which I only put in 48 pounds and the company puts in the same (max). I only just started paying in this year (although I have several other small ones as I kept being made redundant and start new ones - seems a waste)?

I'm glad you think I got my head screwed on