Advice on savings and mortgage and loan

JB1979

Hi,

I was after some advice/opinion.

I have a mortgage at 2.5% with £137k left. I am currently overpaying by £200 a month with no penalties. I think the house is worth less than we bought it - so we probably have 5% paid off.

I also have a RBS expert managed solution (whatever that is - some sort of ISA) worth about 18k. I pay in £150 a month.

I also have a collective investment fund (again not sure what it is) worth 12k. I pay nothing into this currently.

I have no other savings but do have an NHS pension that i pay into each month.

I need 10k for a new car and some home improvements.

My question is should i be saving the money better and what is the best thing to do for the car and home improvements? Use the savings or look at a loan. Although loan rates appear to be higher than any savings interest rates.

Thanks in advance for any helpful suggestions.

Linton

When thinking of investing I believe the first thing to do is to ensure that you have adequate funds in cash to cover emergencies and short term major expenses. 6 months living expense is a guide figure for an emergency fund. The reason is that converting investments into cash may be difficult to do at short notice and could be expensive if you are forced to sell when prices are low.

So my suggestion is that you cease overpaying the mortgage and cease paying into the RBS scheme (RBS website says it is an S&S ISA based equity investment) until you have your cash in place.

Loans should be avoided though there could be a possible considered exception if you can get very advantageous rates.

kidmugsy

I agree with Linton. Divert your £350 per month into a savings account (e.g. a Cash ISA, or an interest-paying current account, or a regular saver that allows withdrawals) until you've accumulated an decent emergency fund.

If the penalties aren't too high, consider closing the collective investment fund, providing £10k for your expenditure and £2k for your emergency fund.

atush

An RBS isa? What are the charges and can you get the same investment cheaper? Banks are expensive, so I would expect the answer to be yes. So transferring this to a better ISA could be a good move for the long term.

Specify your 12K collective investment.

How much do you spend on Essentials each month? Save that amt in cash at least, and bring it up to a min of 3 months, 6 is better.

I am a big fan of both mtg overpayments and S&S isa savings. But you do need a cash fund of some size.

I agree that selling off some of your collective investments could be the way to afford your car/improvements.

JB1979

Hi,

Thanks for the feedback.

The 12k is a Natwest Investment Funds OEIC. I was sold both this and the investment options ISA quite a few years ago, and to be honest have not paid any real attention to them, or whether where good value given my circumsatnces! I need to change that now.

I think i'll look to continue overpaying on the mortgage at £200. I want to be sure we have paid off at least 5 - 10% in the next year or two so when we do need to remortgage/fix we can get a better deal.

I'll close the Investment fund as above, if there is no, or small penalty, put £2000 into an ISA/savings account and then pay into that £150 a month and build up a reserve of 6 months.

Then use the other 10K for my home improvements and car.

Thanks again, and any other advice on the above gratefully recieved.

opinions4u

I also have a RBS expert managed solution (whatever that is - some sort of ISA) worth about 18k. I pay in £150 a month.

I also have a collective investment fund (again not sure what it is) worth 12k. I pay nothing into this currently.

Starting point. Find out exactly what these are, what they're meant to do and understand how much they cost you in charges.

A "throw some money at something that sounds good" approach to investing usually leads to poor returns and decent income for the company providing the service.

bigadaj

JB1979 wrote: »

Hi,

Thanks for the feedback.

The 12k is a Natwest Investment Funds OEIC. I was sold both this and the investment options ISA quite a few years ago, and to be honest have not paid any real attention to them, or whether where good value given my circumsatnces! I need to change that now.

I think i'll look to continue overpaying on the mortgage at £200. I want to be sure we have paid off at least 5 - 10% in the next year or two so when we do need to remortgage/fix we can get a better deal.

I'll close the Investment fund as above, if there is no, or small penalty, put £2000 into an ISA/savings account and then pay into that £150 a month and build up a reserve of 6 months.

Then use the other 10K for my home improvements and car.

Thanks again, and any other advice on the above gratefully recieved.

Alternatively you can transfer the isa and retain the tax shell, hopefully into something more transparent and cheaper.