Paying off the Capital

steve_ben

We have recently come to the end of a 3 year fix deal on a £55K mortgage. We have been on an interest only basis and have been paying a total of £450 a month, £300 or so, of which is an overpayment to reduce the capital.

We have just paid off £30k leaving us with a £10k balance. The interest on this amount is just £25.00 a month, but under the terms of our new fixed rate deal we can only overpay by 5% of the O/S balance.

What i am looking for is a somewhere i can put £425 a month away to pay off the £10K balance at the end of 2 years. I am seriously considering buying £425 a month worth of premium bonds. I know that they will earn no interest, but over a 2 year period I will have saved £10,200 which will be enough to clear the balance and there is always the chance of winning a prize.

Any advice or comments gratefully received

edinburgher

Not sure whether you pay basic or higher rate tax. If basic, your choices would be either top current accounts (for example, 3x T5B Classic Plus Accounts @5% and a Club Ll0yds account @4%), or PBs. Depends how much you like a flutter, you won't make that much from interest in any case over the 24 month period.

SuperSecretSquirrel

If you have (or can open) both a first direct and m&s current account, you can open a regular saver with each, allowing you to save up to £550pm at 6% gross.

The accounts are a perfect fit for someone that wishes to monthly drip feed cash savings. There is no penalty free access until maturity in 12 months time. On maturity you can usually open a new issue for the next year's monthly savings. You'll need somewhere to park the first year's £5100+interest at that point, ed's current accounts all look good at the moment.

First direct and m&s tend to pay £100+ bribes for current account switching, so worth looking into that while you're at it

It's a bit more ffaff than a simple interest paying current account, or premium bonds, but it's likely to be the most lucrative no risk way of saving your £425 a month