Borrowed too much..

smudger65

Hi, I'd like some advice please.
I've got £160k mortgage fixed for 5 years at 2.9% but 30k of that is surplus to requirements. I can pay 10k a year back to the bank without any penalties, but I'm not sure what to do.
Should I payback 10k this year and for the following two and invest the rest i.e. 20k for the 1st year, 10k for the 2nd or should I invest all the money for the 5 year term of the mortgage.
If I did this, given that I have no other debts, should should my first investment be in a cash ISA? Then put the remainder in a savings account or P2P lending scheme?
Any help would appreciated.

puk999

My feeling is to keep the money for a while and try to make a few quid from it. Maybe head over to The Budgeting & Bank Accounts Board and read threads there about what current accounts are on offer as you can get better rates using those than you can from (almost?) all cash ISAs. A good thread to start is Tsb plus account 5%. Also look at the Banking/Saving section for the MSE-official content.

You might want to stick to saving (i.e. using bank accounts, cash ISAs and the like) and stay away from investing (i.e. stocks, shares and funds) as 5 years isn't really long enough to have a good probability of gain.

Is the £10k payback maximum for the 5 year fixed term only or the lifetime of the mortgage? If for the fixed term only, I'd aim to keep all £30k until the 5 years have elapsed then reconsider at that time. If for the lifetime of the mortgage then in a couple of years time start paying it back in £10k lumps.

ChopperST

5 years is on the fringes of an acceptable time scale for investing.

Another factor would be your tax status, are you a basic rate or higher rate tax payer as you will have to factor in whether your investment / savings vehicle can beat your mortgage rate after tax. The TSB account above for example drop to 3% after tax if you are a higher rate tax payer.

smudger65

Thanks for the replies.
I'm on 20% tax, so the 5% from TSB seems pretty good. Should I be looking at ISAs too? I don't have anything invested in them at the moment. If anyone one can point me to any other specific savings products I'd be grateful.