What would you do?

nixinix

Hoping you can help. I am about to have aprox. £70k which we need instant access to as my dads money not mine (no option of tying this money up at all - long story). The bulk of this money will stay with us indefinately but aprox £10k or so will be spent very quickly. Currently have aprox a £70k mortgage which is fixed at 4.99% until Nov 2008. Redemption would be aprox. £2500.

What would you do?

I am considering changing to a one account, or like, mortgage and paying off the redemption charge on current mortgage as that would mean we can effectively save the £500 per month mortgage payments and put it towards the capital/moving house - something I am desperate to do.

Does this sound like a sensible idea - or am I being really silly? All opinions welcome. New poster but long time lurker - please be kind!

kingkano

I wouldnt do it that way personally. Unless I am calculating wrongly, 70k at 4.99% would only actually be about £290 per month in interest, are you counting your capital repayment as well?? You still have to make this part of the payment, even if you offset the complete amount I think.

Also you have a £2500 redemption fee OUCH. With this in the equation for me the only choice is to save the money seperately in a savings account. There are a few I believe with 6.3% interest now (and they can only go up in the near future), thats 4400 a year less tax. If you are lower rate tax then this is pretty close to your mortgage's current rate of interest, without paying any penalty fee!

nixinix

Thanks Kingkano - I understand what you are saying but I really need instant access to these funds....I thought that any decent interest rate savings account normally have a tie in.... which is why I was considering an offset type account.

And yes my £500 per month includes capital and interest - I thought you could have an interest only one account....maybe I made that up!

TuftyMatt

I think Kingkano is talking about the ICICI account at 6.3% interest.

This is as near as you can get to instant access as you only need a few days to transfer the funds back into your current account.

https://www.icicibank.co.uk

meme_3

nixinix wrote: »

Hoping you can help. I am about to have aprox. £70k which we need instant access to as my dads money not mine

If it's your dad's money, you should keep it entirely separate from your own!
In my opinion...

kenshaz

www.icicibank.co.uk
or look in Martin's article on savings
6.05% no catches

nixinix

Thank you for the replies - I will have a look at that ICICI account, I really do need instant access which is why I didn't think it was worth looking at savings accounts, thanks TuftyMatt and Kingkano and Kenshaz - I will look at that article.

Meme for various reasons I would prefer not to share I have been looking after my dads finances for the last few years and I am now an expert at keeping accurate records. Though thank you for your concern.

nixinix

Just looked at ICICI need to tie money up for 6 months to 1 year - not an option at all, I still have Martins article to read but any other thought on asn ofset mortgage please....

getmore4less

There are some things you need to consider that could have an impact on what you do.

What are the tax implications. (depending on whos name it is in)

Who really own the money(is it a gift with reservations for example)

Who is to get the proceeds from the investement.

How instant does it need to be(day,week,month) could it be split.
This opens up things like premium bonds(<week) or having some with term conditions say NS&I savings, 2,3,5 year options)

Obvious option is a high rate instant access account, if there is a low/non taxpayer that can hold the money then is will be better than the mortgage rate anyway. Start with this while you consider other options. whach the compensation limits may be worth splitting.

The tiein/interest rate make offset non-starter for now, might be worth looking after the tie in because you could be looking at a much higher rate then.

kingkano

There is definitely instant access savings accounts around that will give you a close rate to your 4.99 mortgage (after tax). Sainsbury bank for example, but many many others. It will be but a day or 3 to transfer the money back to a current account so it can be withdrawn. Definitely do plenty of research on this one!!

Maybe you looked at icici's fixed term deals rather then the regular savings account?? Also, even though interest on some accounts is paid annually, that doesnt mean you have to leave the money for a year. You can withdraw anytime, and the interest will be credited at the anniversary.

Good luck

pamaris

Can one access Icesave "instantly" if they use CHAPS to transfer? Look into that.