Nationwide Repayments

MarkyMarkD

http://www.moneysavingexpert.com/savings/best-cash-isa

3.07%.

Joe_Bloggs

@MarkymarkD
The West Brom ISA mentioned is 1000 minimum to open so that is three months of saving for the op.
The Northern Rock will do the business for a pound for 3.05%.
Tempted myself.
J_B.

drevilc

Very interesting.

My mortgages are interest only. It seems that if I dont overpay on them, they accrue interest.

I think I might have used the wrong terminology, what I meant was if I make an overpayment over £500, nationwide send me a letter saying your interest paying is now say £2 less per month. This is instead of reducing the length of the mortgages.

So the question now is, do I get an ISA and save £305 per month for 10 years or pay that into the mortgages 70/30% split? Would the mortgage accrue much if I just pay the interest only each month?

Cheers

Joe_Bloggs

@drevlic on an interest only mortgage you pay interest but no capital.
If you choose to overpay then you pay capital. This reduces the interest you are charged each day/month.

What you have not said is the term of the mortgage. This is the latest date that the lender will allow for the mortgage to be paid off. You can alter the theoretical target date by varying capital payments but the absolute deadline is key.

3.05% is only 0.55% above the current base plus 2.0% .The difference on a balance of 12 X 305 pounds saved or overpaid is 20 pounds per year.
J_B.

milanos

drevilc wrote: »

Very interesting.

My mortgages are interest only. It seems that if I dont overpay on them, they accrue interest.

I think I might have used the wrong terminology, what I meant was if I make an overpayment over £500, nationwide send me a letter saying your interest paying is now say £2 less per month. This is instead of reducing the length of the mortgages.

So the question now is, do I get an ISA and save £305 per month for 10 years or pay that into the mortgages 70/30% split? Would the mortgage accrue much if I just pay the interest only each month?

Cheers

If you only pay the interest each month, the outstanding balance will remain unchanged until the end of the term, it won't go up.

If you keep paying the same amount as you are now (and the interest rate was to stay the same), the interest part will keep coming down and more will go to the capital. Your mortgage statement will say the term is still the same and your monthly payments are coming down, but in effect, you'll still end up paying it off sooner

MarkyMarkD

But, if the rate on the mortgage is less than the savings rate you can achieve, you should pay interest only forever (unless that relative rate situation changes) and then you will be able to clear the capital once the savings match the mortgage balance.

Overpaying is a pure waste of money.

drevilc

Thanks for your comments

I have 15 Years and 7 months left to go on both Mortgages.

I have had a look at the ISAs and the terms are quite high for 4% plus accounts. Maybe a two year Post office account to start with and go from there?

Im on the variable mortgage at the moment, and I am unsure if the ISA rate will beat the mortgage interest by much? It seems very similar?

Evilm

To be honest if it makes you happier to see your mortgage balance go down then don't worry about how much 'more' you could be earning in a savings account.

You can try to eke out as much as possible from the money you do have or you can spend it where it makes you feel more secure. I know I definitely end up doing the second because I want to know that my mortgage is going down and I don't trust that if its in an ISA or the like that I won't spend it on other things instead.

sheslookinhot

Why don't you switch to repayment and reduce the term, paying your currently monthly payment (including OP).

drevilc

I would switch to a repayment, however being on the variable rate currently and getting a good deal without paying the changeover fee on both mortgages is good.

And to be honest I agree with evilm about the having money in the account and being persuaded to get a new kitchen by er in doors or something.

Interest only and a standing order setup to both accounts for a 70/30% split is for me a better repayment mortgage. 11 Year target. Will pay more if I ever get a pay rise.

Thanks everyone for your quick responses. Really helpful