Overpay Vs Save with Firstdirect

version2014

Hello, can I check something with you clever peeps.

I found out from someone on here (forget who very sorry to the person) that first direct do a monthly saver at 8%

Am I best to continue overpaying the mortgage at 3.99%, or stick the money in an first direct for a year and then overpay at the end of the year?

pawlala

how much money do you have?

version2014

pawlala wrote: »

how much money do you have?

Well I was thinking about the OP I make each month. The OP is £467.02, so the question is do I put that in the mortgage, or do I put it into a monthly saver?

WestonDave

In theory earning 8% rather than saving 4% is a no brainer - but you need to remember tax. If you are a 20% payer then you will actually get 6.4%, or a 40% payer 4.8%. As a 20% payer it makes more sense to put it in the 8% account, but as 40% payer its more marginal and the gain could easily be lost if something goes wrong - e.g. high rate ends and you don't move the funds quickly.

Edited to add - the first direct account is max £300 per month, and only lasts at that rate for 12 months. So you could do it and keep the other £167.02 overpaying as long as you are sure to be disciplined when the First Direct account finishes. You also need a First Direct current account. That might cost you £10 per month unless you qualify for it free (pay in enough or have a savings account other than the 8% account which doesn't count!)

version2014

WestonDave wrote: »

In theory earning 8% rather than saving 4% is a no brainer - but you need to remember tax. If you are a 20% payer then you will actually get 6.4%, or a 40% payer 4.8%. As a 20% payer it makes more sense to put it in the 8% account, but as 40% payer its more marginal and the gain could easily be lost if something goes wrong - e.g. high rate ends and you don't move the funds quickly.

Edited to add - the first direct account is max £300 per month, and only lasts at that rate for 12 months. So you could do it and keep the other £167.02 overpaying as long as you are sure to be disciplined when the First Direct account finishes. You also need a First Direct current account. That might cost you £10 per month unless you qualify for it free (pay in enough or have a savings account other than the 8% account which doesn't count!)

Ah does the monthly saver account not count? In that case it's not worth it cos the £10 per month would mitigate any gains on the 8%.

Hmmmm, thought it was too good to be true.

pawlala

If you sign up for an easy saver the £10 fee is eliminated. At least that's what happened to me last year. I don't pay any fees. The biggest risk is when you forget to transfer £300 per month into your FD current account before FD takes it and puts it into your regular saver, putting you £300 overdrawn. A standing order from your usual bank account into FD a couple of days before the saver solves this. And I agree that £300 into FD and OPment of £167.02 for 12 months appears to be the best use of your money

version2014

pawlala wrote: »

If you sign up for an easy saver the £10 fee is eliminated. At least that's what happened to me last year. I don't pay any fees. The biggest risk is when you forget to transfer £300 per month into your FD current account before FD takes it and puts it into your regular saver, putting you £300 overdrawn. A standing order from your usual bank account into FD a couple of days before the saver solves this. And I agree that £300 into FD and OPment of £167.02 for 12 months appears to be the best use of your money

Does sound like a plan, is the easy saver the online type saver?

Is this defo right 8% on the monthly saver will earn me more than the 3.99% on the mortgage overpayment.

I know this sounds silly, but I mean is it the same interest type/rate etc?

As that seems to be double the interest rate ?

Maybe I should call FD about the easy saver. Hmmmm.

version2014

I just found out from another thread, that once your RS expires, you simply close it and open a new one with FD.

Also if you open a savings account with them, there is no monthly fee's.

I am just looking into the switching £125 reward element.