Mortgage vs Savings

I'm in a bit of a quandry...

What is better: pay money off the mortgage or get money tucked away in some nice high interest accounts?

Here's the situation: I have a £130 000 mortgage and have recently come into some money (£10 000). Do I pay off a nice chunk of the house or stick it into a high interest account and continue with my monthly overpayments?

I currently have approx. £20 000 invested in other property which I one day hope will be enough to pay off another chunk of the mortgage.

Replies

  • InMyDreamsInMyDreams Forumite
    866 Posts
    Part of the Furniture 500 Posts Name Dropper
    Forumite
    Hi Mr. Tunisia,
    This is a can of worms and regularly debated on here, so your best bet is to search this forum. To start you off, one most recent debates kicked off on this thread which is think is on page three now.
  • jamesdjamesd Forumite
    25.8K Posts
    Part of the Furniture 10,000 Posts Name Dropper
    Which has the higher after tax interest rate? It's probably savings if you have your cash ISA limits available and have a fixed rate mortgage. Put the money to whichever one has the highest after tax (or free of tax with an ISA) interest rate.

    The same applies to your overpayments: put them in the mortgage if that has the higher interest rate, in savings if they have the higher interest rate.
  • comping_catcomping_cat Forumite
    24K Posts
    Part of the Furniture Combo Breaker Mortgage-free Glee!
    Forumite
    Might be worth waiting til next month to decide - i think they are planning to increase the interest rate so you might find that the savings rates are going to be better soon. In the meantime, keep the money in savings and then decide once we know what is happening.
  • hello

    would you be charged for making an overpayment of £10k? - if so, its prob more cost effective to save the money in a high-interest account and pay off when you no longer get charged an overpayment fee.
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