Borrowing on Mortgage to put into savings

baz8755

I have a flexible mortgage and am in the fortunate situation of having paid it down to £1K several years ago, this was mainly down to a lot of stoozing & overtime

Anyway I got my statement today and found that my mortgage rate currently stands at 1.59% and that got me thinking. My savings account currently pays 3.17% for the next 12 months.

So if my maths are correct I could take £83K out of my flexible mortgage and stick in my savings for 12 months and make a nice little profit of £785 after tax. Possibly more if I my wife also did the same (ensuring we each only had £83K or less in each institution).

Can anyone offer advice and guidance as to what I also need to consider as I cannot as yet see any reason not to proceed.

Regards

Baz

opinions4u

Do it.

Just keep an eye on changes to both mortgage and savings rates!

And being pushed in to higher rate tax if close to the new thresholds.

innovate

Haven't double-checked your precise numbers but the principle is sound, as long as long as you get more interest on your savings (after tax) than what you pay for your mortgage. You might even want to look at a 1-year fixed savings account, which pays a bit more still than 3.17%. It's just another form of stoozing - - a lot easier than 'traditional' stoozing.

BTW, I trust you have both maxed your cash ISAs? If not, then putting £5,640 each into a good cash ISA will pay you some extra interest.

Perelandra

Agree with the above posters- do it.

The only (very small) consideration is that if the bank you chose to save with did go belly up, and you needed the FSCS protection, there might be a period of time where you needed to pay interest on your mortgage, and not be receiving interest on your savings. Wouldn't worry too much about that though.

Even that small problem would go away if ou were to save with the bank who you have your mortgage with, if they offer a decent interest rate. You wouldn't even need to worry about the 85k limit if you used the lender's saving product, I believe! (Plus there's a wonderful irony in borrowing from the bank, and lending them the same money back at a profit... :P )

baz8755

I like the idea of investing in the same bank I have the mortgage with but not sure if it would work or be safe.

The bank I have the flexible 1.59% mortgage with is Birmingham Midshires and I notice they do indeed have a 3.20% instant access savings product. If I were to go down the route of investing say £100K from my mortgage, 1) how safe would it be if the bank went bust, 2) Would this set alarm bells ringing and cause them to reject/penalise me.

Regards

Baz

Isis_Black

I would rather just not have that mortgage there anymore
And just save any spare earnings
Is £730 odd worth the risk if anythinge went tits up???
To me having that mortgage gone is of greater importance than saving right now especially incase those interest rates go up as a lot of banks are looking to do even though the base rate hasn't changed
Just get you spare earnings going into that savings and be happy you have no mortgage to stress about :-)

Wh05apk

I would be cautious of placing the funds into fixed bonds, if rates rise for any reason - euro issues/sterling collapse? then interest rates and your mortgage could rise, but you will be stuck in the bond for the term regardless.

If you can each earn nearly £800pa whilst keeping the funds accessable seems like a good idea.