got motivated, now what do I do with cash

newtomoneysaving_2

Hi All,

Quick question,

Currently have circa £100K m.gage fixed for next 2/3 yrs.total term 15yrs
I have approx £8000 cash,

Do I use it to pay off capital either
a)reduce monthly costs (was estimated about £65 per month reduction)
b)reduce term of m.gage (not sure how much this will reduce term)

or spend spend spend......if so i may need time away for blowing it lol

thanks

newtomoneysaving_2

Hi All, Not had a single reply, well at this rate I might just spend it

But the brain tells me to pay it off my mortgage

Can anyone advise what is best , got my details confirmed at present my mgage is £100000 with 15 yrs left.

even the number 8000 is starting to burn a hole in my pocket and mind

thanks

abbecer

Hiya,

I'm not an advisor but i would think that if you are able to put it as a lump sum on your mortgage it would reduce the term and interest by a fair but. Hope someone comes along who know s a bit more than me.

Rebecca x

cupid_s

Hi there. I had £6000 saved to pay off my mortgage and at the time my mortgage (~69k remaining) was fixed for another 18 months. As it was fixed I enquired about charges for paying this lump sum off the mortgage and after hours of calculations it wasn't worth it in terms of interest saved as opposed to what i could get by putting it in a savings acconut. My money is now sat in ISAs gaining interest and is all going to be paid off the mortgage this september.

Depending on the penalty you face it might be best to do what I did (this is just my opinion I know very little about banking). Also when your mortgage becomes unfixed chances are the rate will go up, even if it's only for a short while until you fix again. If you coincide this with a big payment off the capital you wont reallynotice any difference and I'd them reduce the term down so you pay it all off more quickly.

Good luck (and it seems a shame to spend it all, but spending a little might not be too bad!)

tryhard_2

Hello!
best to check if you face any penalties for overpaying; some fixed mortgages allow upto 10% of capital to be overpayed in a year. if you can overpay best to reduce term.
HTH

newtomoneysaving_2

Hi, thanks for the info, I have just checked and although fixed for another 2 yrs I can pay off up to 10% per annum.

If I pay before end of Feb then I can in pay more after as this is my annual statement date.

So pay off the money a.s.a.p and ask for the term to be reduced ?

many thanks

Rachman_2

If you pay it off as a lump sum now, it will save you aa year and 8 months off your maortgage (assuming it's now 5% and will be for term). It will save you payin an extra £8231 over the term at the same time.....

lizzyb1812

Whilst it is great for you to have the ability to pay a lump off your mortgage there are more options to consider than reducing the term, reducing the payments or spending the lot.

Are you employed? How secure is that employment? What are the terms of your employment as regards getting paid if you're off sick? Do you have savings? Do you have any debt other than your mortgage and which is at a higher interest rate?

I'm not asking for the answers to these questions - I'm suggesting you ask yourself.

All my spare cash now goes on paying down my mortgage but as I'm self-employed I first built up fairly substantial savings as an emergency fund. And that was after paying off the blasted credit card debts.

It's about balance.

But cutting the term and reducing the interest total payable as per the post above does sound good

lizzyb

StratApproach

I've just switch mortgage (same provider) to a flexible one, and therefore, this month I have just started £500 overpayments (minimum amount to allow a recalculation of the interest).

Being self-employed, I make sure that I've go at least 4 months money to aside. I will continue paying the overpayments until the money I have coming in dries up or makes my money budget poor.

I'm doing this to enable me to take a payment holiday or reduced payments if I need to in the future.

I was ready to pay a lump sum of 2.5K off (mortgage mid 70's). but I thought it would be better to pay monthly.

I do think having money in savings account is too tempting to spend.

Personally, If I had a mortgage where you can pay 10% overpayment, then I'd split the difference on your lump sum, use half the money on the mortgage and put the rest into savings. win-win and still feel great. You could take advantage of a fixed rate cash isa (3K) wih probably a higher return than your mortgage rate. Then after the fixed term think again what to do with the money.

Reducing term or interest rate is down to your current and potential circumstances.

StratApproach

lizzyb1812

StratApproach - that's exactly what I mean - balance

lizzyb

jamesd

I'd invest 7000 of it in 7 different funds in a stocks and shares ISA, each from a different part of the world or area of the market. Then try to do the same again next year. You should be able to exceed 9% return on investments long term and that's better than you can get from mortgage overpayments.

If that 8000 in a cash ISA you're close to the 12000 needed to get 5.75% interest from the Ruffler Bank cash ISA and might be able to do that.

If it's not in an ISA, is the NS&I cash ISA rate higher than your mortgage rate? If it is, putting the money in this cash ISA would make you more than you save in mortgage interest.

Starting several regular saver accounts would also earn you more in interest than you pay on the mortgage and that 8000 would let you start one every other month for six months at 250 each, repeating with a new set of three each year. But don't take money out of an ISA to do this.