Overpay mortgage or other investment?

adonis10

Current situation is as follows:

68k savings split as follows:

42.5k higher interest current and regular saver accounts
12.5k measly 1% isa
5k premium bonds
2.2k Virgin all share tracker
5.5k in Hsbc saver (next to no interest but need the bulk of this readily available for house renovation costs)

Pension:
Monthly contributions 24% of salary (16 employer, 8 employee)

Debts:
149.7k mortgage fixed for 5 years @ 2.14% (joint with my partner)

After all bills and monthly spending money I have about £800 left over. Thinking about overpaying the mortgage with about £200 of this per month and wondering what is best to do with the rest. Obviously £600/month isn't a great deal so it can be used to go towards my regular saver accounts (monthly £250 Hsbc, £400 Lloyds, £500 nationwide). Will also transfer out some of the money that I have in the pathetic isa and use this to fund the savers.

Questions:

Wise to overpay the mortgage, providing I can fund all the regular savers with the max (4-6% versus 2.14% mortgage rate)? Obviously the savers are higher rate than the mortgage but a) we don't know when they will change the rates on them and b) for all i know mortgage rates may well be much higher in 4.8 years when I need to get a new deal.

I've got about 2.5k of my annual isa allowance left (foolishly used a lot to fund the paltry waste of space I currently have) so would you add to the all share tracker for the final 7 months of this year to top that up?

Private pension contributions?

I'm aware that it's hardly a fortune but I want to ensure I maximise what I have left each month as I am well aware that my situation could change (job loss, unexpected cost etc.).

Being mortgage free again would be delightful so I am veering towards overpayments.

Any advice welcomed.

atush

I'd use a S&S isa. You could move this money to pension or mtg later as required, but your pension provision looks good, and you are cash heavy.

jimjames

Various options discussed here

https://forums.moneysavingexpert.com/discussion/5515712

adonis10

atush wrote: »

I'd use a S&S isa. You could move this money to pension or mtg later as required, but your pension provision looks good, and you are cash heavy.

Any particular one? Can use up my 16/17 allowance in next 3 months so where would you put it after that?

I do like the idea of chipping away at the mortgage though due to the daily interest and the years that can be shaved off by doing so.

Pension is good on paper but I've only been in it for 10 months, 7 at the highest rate. I am 33 and it's my first proper pension so my provision is currently utterly terrible!

Eco_Miser

adonis10 wrote: »

Current situation is as follows:

68k savings split as follows:

42.5k higher interest current and regular saver accounts
12.5k measly 1% isa
5k premium bonds
2.2k Virgin all share tracker
5.5k in Hsbc saver (next to no interest but need the bulk of this readily available for house renovation costs)

You could put the 5.5k in HSBC somewhere better, and fund your house renovation from your current accounts or premium bonds.

You could transfer your cash ISA to S&S.

There are better S&S ISAs than Virgin and better indexes than the FTSE allshare.
See Monevator for much discussion on investing.

You are allowed £5000 of dividends and £11,100 of realised capital gains without incurring tax, so your investments don't need to all be in an ISA.

Premium bonds are generally not a good investment, but there is the chance of winning a million, and they're easy access.

adonis10

Eco_Miser wrote: »

You could put the 5.5k in HSBC somewhere better, and fund your house renovation from your current accounts or premium bonds.

You could transfer your cash ISA to S&S.

There are better S&S ISAs than Virgin and better indexes than the FTSE allshare.
See Monevator for much discussion on investing.

You are allowed £5000 of dividends and £11,100 of realised capital gains without incurring tax, so your investments don't need to all be in an ISA.

Premium bonds are generally not a good investment, but there is the chance of winning a million, and they're easy access.

True, there must be some 1-1.5% account for it to go in for now until I decide on an alternative strategy.

Ah yes, so even though I opened the cash isa in this tax year, I can still transfer the full amount to my s&s isa? I've been meaning to change my s&s isa for a while but as it has very little in, I've not bothered until now. Will check out monevator.

Premium bonds - agree, but for the sake of £100 or so interest a year I'm willing to leave in 5k, just in that daft hope that a decent prize would come out of it. Someone has to, and, lotto aside, it's basically the only way to enjoy a proper financially free life. Obviously not gonna happen, but at least being in the pot makes it a pipe dream.

Eco_Miser

adonis10 wrote: »

True, there must be some 1-1.5% account for it to go in for now until I decide on an alternative strategy.

I was actually thinking S&S.
Unless you have a need for all that £42.5k +£5.5k + £5k in cash, (eg emergency fund, planned expenditure) you are likely to be wanting to find a new home for it as rates drop, so might as well start moving the lowest payers now. You can fill up accounts from your surplus income if needed. Certainly use the remainder of your ISA allowance for S&S.

adonis10

Eco_Miser wrote: »

I was actually thinking S&S.
Unless you have a need for all that £42.5k +£5.5k + £5k in cash, (eg emergency fund, planned expenditure) you are likely to be wanting to find a new home for it as rates drop, so might as well start moving the lowest payers now. You can fill up accounts from your surplus income if needed. Certainly use the remainder of your ISA allowance for S&S.

Good point. No, I only really have need for 5k of it in cash and then the rest can safely sit somewhere, hopefully building up. The £800/month excess I have from my salary can then top up other accounts and build an expenses fund (holidays, car repairs etc.).


Which S&S would you recommend? A s&s isa?
Need to scrap my virgin one asap so need to make the right call. To transfer it do I need to open a new one and during that process let the new provider know that I am transferring in from Virgin, and then they will initiate the transfer?

Eco_Miser

adonis10 wrote: »

Good point. No, I only really have need for 5k of it in cash and then the rest can safely sit somewhere, hopefully building up. The £800/month excess I have from my salary can then top up other accounts and build an expenses fund (holidays, car repairs etc.).

I'd keep at least 3 months expenses in cash - you don't want to be forced into selling your investment again if something does wrong just after you've fully invested and have no spare cash.

adonis10 wrote: »

Which S&S would you recommend?

I wouldn't. That's coming close to regulated activity.

1. Decide what to invest in, eg a multi-asset fund.
2. Select a platform/broker that carries the investment and has charges most appropriate for your level of investment. Monevator has a table to help.
3. Read the platform's T&C's and other information.
4. Sign up and initiate transfers.

Most platforms handle both ISA and unwrapped accounts under on log-in.

adonis10 wrote: »

A s&s isa?
Need to scrap my virgin one asap so need to make the right call. To transfer it do I need to open a new one and during that process let the new provider know that I am transferring in from Virgin, and then they will initiate the transfer?

If the Virgin is current year's money, yes. If it's previous year's money you can initiate the transfer at the same time, or later, or never.
Also ask them to transfer in from the cash ISA.

atush

3-6 months savings in cash probably.

For you S&S, I agree there are better than the ftse all share (but that is better than ftse 100).

I'd look at a global tracker, or the vanguard series (read the thread on Vanguard). At least until you have a better feel for investments.

as for pension, how much is your total pot worth? You could put some towards that too.

If you emotionally feel better with chipping the mtg, put 100 a month into it. 500 into S&S isa, and the rest in your pension?

You can do more than one thing with the spare cash.

dunstonh

2.2k Virgin all share tracker

one of the worst on the market. You need to look at that.

Pension:
Monthly contributions 24% of salary (16 employer, 8 employee)

Does that put you on track for your retirement needs or still leave you short?

Are you married or have a partner? How is their provision compared to yours (remember you both get a personal allowance in retirement - so dont waste them).