An objective view please

newtothis_4

I am dithering over the best course of action to take and would appreciate your views.

Basically I have £3000 in savings and £11,500 in premium bonds

My debts are £8,000 on credit cards and £1500 new furniture.

I have a mortgage of £213000 which is tied in for another year.

My original plan was to pay my mortgage on an interest only basis and save at least £500 per month into premium bonds for two years then pay off the lump sum saved (i had calculated that the mortgage would be down by £12,000 if I had a repayment mortgage) but the chance that the premium bonds may pay out :j

My credit card debt is being tarted (0%) thanks to this site :T , and I am paying this off at £500 per month

And my furniture is being repaid monthly - also interest free

But am I doing the right thing??

Now I am thinking I should pay off the cards and furniture with the money I have, and pay an extra £1000 off my mortgage every month.

What are your thoughts?

sarahriches

Im sorry, i dont have any advice for you but just wanted to say that i love your sig! Fair play

onedayiwill

Sorry, I don't really see the dilemma or hesitation here. Pay off your debts. Then you can do what you want with the rest of money - premium bonds, extra payments on mortagage. Whatever. It just doesn't make any sense to me to keep hold of debt - even if it is interest free - when you don't need to.

Storm

Personally I've never really seen the point of premium bonds - yes, technically you *could* get a huge windfall, but the money is sitting there not even earning you interest!

With such a big mortgage, and with interest rates still going up I would say to switch to a repayment one asap, and maybe even use a lump sum from the premium bonds to reduce it too as otherwise you'll pay more in interest on the outstanding mortgage than realistically you're likely to get in a windfall (assuming you don't become an overnight millionaire!)

If the credit card & furniture is all at 0% and you're making the repayments fine, then I would make the mortgage your first priority - though I would recommend keeping a buffer in savings just in case you run into a couple of lean months as your outgoings appear to be large.

You may get different advise on the mortgage board though...

CLAPTON

premiun bonds are simply a way of gambling with the interest on the money rather than the capital..so you are basically gambling with about 500 per annum.

Pay only the minimum amounts on the 0% deals but ensure you have sufficient funds being held in the best saving a/c you can find to pay them off once the 0% deals come to an end.

after ensuring you can pay back the 0% loans before the 0% period runs and keeping a prudent (small) amount of saving for emergencies then pay the mortgage back asap and so reduce the interest you are paying.



Basically there is no point in having savings that earn less than the interest you are paying and I see no reason why you want to be on an interest only mortgage.

lynzpower

Im inclined to agree about the P bonds. Ive got a small amount and nothings paid out on those yet. How long have you had them, how much have you made out of them so far ?

Id pay off the debt with the P bonds then reduce your mortgage with the rest. Interest rates are rising and TBH I think its a very risky investment, partly as P bonds dont seem topay out with any regularity

wannasavemoney

Personally, If your 0% interest stuff can be paid off within the timespan available then continue paying them off as you are doing now. Then cash in the p bonds and pay most of that off your mortgage (keeping some avail cash for emergencies etc). If your mortgage is the only debt you are actually paying interest on at the moment? Then change your mortgage to a repayment one and pay off extra if you can to reduce your interest liability. Its always useful to put in your mortgage details on one of those mortgage calculators and play around with the figures, you will probably be astounded by how much difference just paying off an extra £100 per month will make. I know I was. At the moment, if your mortgage is on interest only isnt it just like a debt that you are just paying the minimum off? Even if you can't go fully repayment, most mortgage lenders let you do half and half. Hope that helps you make a decision.

newtothis_4

Thanks for the advice, you are telling me what my niggling little voice is telling me. I have been saving £500 or more into premium bonds every month since June 2006 - and I have had one £50 payout.

I have dithered long enough and have decided to pay off the cards and furniture - but will keep my mortgage on interest only and overpay by £1000 per month - that way in theory I will be at the same point in June 2008 in relation to the outstanding balance as if I had a repayment mortgage to start with.

bandraoi

If your cards and furniture are at 0% then pay them at a rate that will pay them off exactly when the 0% rate ends, then overpay your mortgage as much as possible.

Put it into the snowball calculator and you should see that that's the best bet.