Is this a good idea??????

wuzzbert

Im fixed at 4.25 till dec 08 and have 25k in the bank, to date i owe 47k on the mortgage. Shall I:

1) Keep my dosh in a high interest account and come dec 2008 pay 25k off my mortgage (this helps avoid redemption fees too!!)

2) Place my money in an investment fund and hope it does well.

3) Do some homework and invest it myself

4) Buy another property and rent it out!

Im single employed (35k a year) and flexible and dont mind if I sell up and move and that includes abroad!!

Please tell me what would you do if you were me???

Moneygoes2money

There are a lot of possibilities here and certainly more than one correct answer depending on your risk profile and attitude towards the stock market and property market. However, you asked what I would do so here goes.

You have an excellent fixed rate and you can easily obtain a higher rate of interest on deposit accounts but it will depend on your tax rate (Individual Savings Accounts (ISAs) are tax-free). If you are a basic rate taxpayer then you need to deposit in an acount paying more than 5.3125% (i.e. 4.25% mortgage rate divided by 80% because you pay 20% savings tax as a basic rate taxpayer). If you are a higher rate tax payer then you will need to find a deposit account paying more than 7.08%, which I don't think will be possible, so it will probably be better paying off some of your mortgage debt if you can do this WITHOUT PENALTY (check your mortgage offer document).

I would pay £3,000 into a mini cash ISA (unless you have already done so in the current tax year) and deposit the balance into a high interest savings account. Then on 6 April 2008, I would pay a further amount into an ISA (I think the amount allowed increases to £3,600 next year but I am not sure).

Then in Dec 2008 make a lump sum overpayment on your mortgage depending on the new interest rate for the re-mortgage and savings rates available at the time. By this time you will have £6,600 in your ISA and I think a lot of people believe it is worth keeping capital in a tax-free ISA environment.

All this means you could reduce your mortgage by £18,400 leaving approx. £28,600. If you can afford to overpay on a monthly basis this is definitely worth considering also but make sure your existing and your new mortgage in Dec 2008 will allow you to do this so you can clear your mortgage quickly. Also, consider a bit of stoozing but this is too detailed to go into here so do a forum search instead. Personally, I would consider the stock market and/or another property purchase when my existing mortgage is paid off.

This is what I would do but remember I am a basic rate taxpayer! Hope it helps.

robnye

couldnt you make trickle payments of your mortgage ie £500 per month (or what ever maximum overpayment is with your mortgage)

missk_ensington

You should leave your mortgage as it is I think. I've just paid £4,000 off my mortgage and it only reduced my monthly payment by £15 a month so now wondering why I bothered!! If you have any debt whatsoever clear it all first.

You could try researching the stock market, I know prices are low so its a good time to buy. If its a long term investment I think you might do well, I think its only risky on the short term but you;re best checking it out for yourself. I would personally have bought shares in NR if I had any spare money a few days ago.

I agree with the above, put £3,000 into an ISA.