Where to put my extra savings please?

lauren565

Hi,

Hope someone can help!!! I have just got a new mortgage which only allows overpayments of 500 per month in the first two years (two year fixed.) This poses a problem to me because I want to massively overpay. Therefore I am going to do the 500 extra allowed to the mortgage, however I have a spare 900 per month that could be saved on top. I am unsure of where to put this money ready for when the two years is up, when I plan to remortgage for a better interest rate.

I was looking at isas but i think you can only save 5k in per year, which is not suitable. Is there any other option I can look at?

Thanks Lauren

R_P_W

Maybe you should have got a mortgage product that better suited your needs if you wanted to overpay more?

Fill your isa limit and then just put in the best paying savings account you can find.

jamesml

I'd take a look at some of the league tables to get an idea of the best accounts currently available.

If it were me I'd probably end up splitting it up - use an ISA to the fullest extent you can, and then look at your options from there - next step I'd be looking at is regular savings accounts - generally you are looking at £250 a month/£3,000 a year, but nothing to stop you opening a couple up. Easy access savings accounts are offering 1.8% at the moment, compared to a regular saver offering 3.25% (Barclays).


You should also look at linked accounts - some banks will offer better rates if you have a current account - don't know if First Direct are still doing this. HSBC used to when I looked a while ago but nothing to guarantee they still will.

lauren565

brilliant, thank you

lauren565

You know when it comes to remortgage time,

1. Can I use savings that i have saved elsewhere to then apply for a smaller mortgage??
2. Is it possible my current lender will be able to put me on to a better deal, or do i have to use a financial advisor?

Thanks!

I used to have a offset mortgage and this fixed rate stuff with limited overpayments is all new to me.!!!

japmis

Don't forget premium bonds too

laptop80

You may want to look at investment ISAs as well as cash ISAs - you can put another £5,760 in one, so £11,520 in total.

If you want to err on the side of caution and have ready access to your money in an emergency, it may be worth considering the Santander 123 current account, which pays 3% interest gross interest on balances over £3,000. That's in the region of most ISAs anyway, so not a bad savings account.

dtsazza

lauren565 wrote: »

1. Can I use savings that i have saved elsewhere to then apply for a smaller mortgage??

Yes, this should be possible. In the usual case someone will drawn down the amount needed to fully pay of their own mortgage - but if you add e.g. £10k of your own money, your mortgage from the new lender can be £10k smaller. (And you may well be able to get better rates due to the lower LTV).

2. Is it possible my current lender will be able to put me on to a better deal, or do i have to use a financial advisor?

It's definitely possible - though there's no guarantee it will be the best deal.

As with applying for a mortgage in the first place, it would be prudent to at least check some benchmark rates that other lenders are offering. An IFA/mortgage broker will potentially find you better deals, and have more experience of which mortgages are appropriate. But neither is strictly necessary.

I used to have a offset mortgage and this fixed rate stuff with limited overpayments is all new to me.!!!

Perhaps - and I mean no negativity in this - it would be a good idea to use a mortgage broker next time you're looking at remortgaging. They will usually run through various questions with you to ascertain what you're looking for (above and beyond "the lowest rate"), and would likely have steered you away from deals that limit your overpayments to substantially less than you want.

Still - on the plus side, at least you've learned something more about mortgages now! And with current low interest rates, you can quite possibly get a similar rate on your savings to what you're paying on your mortgage, which would mean you're no worse off.

laptop80

lauren565 wrote: »

You know when it comes to remortgage time,

1. Can I use savings that i have saved elsewhere to then apply for a smaller mortgage??
2. Is it possible my current lender will be able to put me on to a better deal, or do i have to use a financial advisor?

Thanks!

I used to have a offset mortgage and this fixed rate stuff with limited overpayments is all new to me.!!!

When you remortgage you will be able to use your savings to reduce the capital sum of the mortgage.

Your lender may be able to put you on a better deal - just speak to them when the time comes. Otherwise you can compare rates on any of the comparison sites and arrange a switch by speaking to other providers. No financial advisor required.

lauren565

Thank you very much indeed : )

Mentox

I started with a low monthly payment so I could refurbish my house. Once that was done I had extra money to spare and I called Nationwide and asked them to reduce the mortgage term from 25 years to 7.5 years. I have a fixed 2 year deal with Nationwide.

This increased my monthly payments quite a bit and it will save me thousands. There is a fee of 20 pounds but that's nothing compared to the savings I will make.