Mortgage Overpayments

ValiantSon

AlexTheLion wrote: »

Have you not considered saving your extras in cash accounts? 3-5% interest accounts available from various providers with instant access if required. Or at least filling up the larger paying ones before heading towards the PB. I like the idea of the 'in it to win it' with premium bonds, but would be disappointed with no returns at all that could have been in a cash account.

Buy a lottery ticket then. You have a 1 in 97 chance of winning £25. The chance of winning the same amount with one premium bond is 1 in 24,500.

The only advantage is that your stake is protected, but then that is £100 not earning any interest, whereas you could save £98 in an interest bearing account and buy a lottery ticket.

ValiantSon

Drucifer wrote: »

Thank you for your input.

I did briefly consider saving it in a cash account, I've already got many accounts each with a specific purpose and to my knowledge, though could be wrong, I'd need a particular amount of Direct Debits to pay out or a certain amount to pay in to qualify for interest, just too much juggling around for my liking and extra things to track, and I prefer my Direct Debits to be at an absolute minimum.

So not my first choice, but can be done if this is the best option.

If you really can't manage to organise a higher paying current account then you could always open an easy access savings account where there are no DD requirements.

Another, and more sensible option would be a regular saver paying 5% from one of the following: Santander; Nationwide; M&S; First Direct: HSBC.

ValiantSon

bertpalmer wrote: »

Personally I would invest it. My thoughts are that you could easily make 10% a year on it. Minimum. But that’s just my attitude to risk - assuming 3 year minimum period.

Premium bonds wouldn’t be on my radar as an option.

Ignore this!

A three year minimum period for an investment is way too short. I doubt if you would find any IFA who advised you to do this (and if you could then you would be able to sue them when your investment had lost value three years later).

Drucifer

Thanks Everyone for the responses.

ValiantSon, you've convinced me here, and on seeing many other of your posts elsewhere, that PB's are a waste of time, so I phoned up my mortgage lender today and got their sort code and account number, I've also cashed out the PB's and will be transferring the money by bank transfer to the lender, from now on the money will be sent straight to them too, I've to phone them tomorrow again though to make sure the payments are used to reduce the term of the mortgage. Sound sensible?

Peelerfart

bertpalmer wrote: »

Personally I would invest it. My thoughts are that you could easily make 10% a year on it. Minimum..

Oh please share this, minimum 10% site/Investment with us, please

ValiantSon

Drucifer wrote: »

Thanks Everyone for the responses.

ValiantSon, you've convinced me here, and on seeing many other of your posts elsewhere, that PB's are a waste of time, so I phoned up my mortgage lender today and got their sort code and account number, I've also cashed out the PB's and will be transferring the money by bank transfer to the lender, from now on the money will be sent straight to them too, I've to phone them tomorrow again though to make sure the payments are used to reduce the term of the mortgage. Sound sensible?

Assuming that your mortgage interest rate is higher than you can earn on interest from savings, then yes. Even if you could get a higher interest rate in the savings it's worth keeping in mind the potential income tax (if you exceed the £1000 / £500 allowance), which would eat into the return.

There is also a significant psychological gain from paying off the mortgage sooner, and this does sometimes get overlooked. Once the mortgage is clear you will have more cash to turn towards other investments.

At least I've managed to persuade one person about premium bonds!

Drucifer

ValiantSon wrote: »

Assuming that your mortgage interest rate is higher than you can earn on interest from savings, then yes. Even if you could get a higher interest rate in the savings it's worth keeping in mind the potential income tax (if you exceed the £1000 / £500 allowance), which would eat into the return.

There is also a significant psychological gain from paying off the mortgage sooner, and this does sometimes get overlooked. Once the mortgage is clear you will have more cash to turn towards other investments.

At least I've managed to persuade one person about premium bonds!

I'm always trying to make the best decisions financially so I really do appreciate the advice, after I thought about what you've said in your posts it does make sense avoiding PB's, so far they've earned us nothing and has provided no real benefit to us, the money has just sat there, but actually using it to reduce the term of the mortgage has a real benefit, it guarantees paying less interest over all and reducing the term of the mortgage over all, that sounds good to me.

I keep enough cash to cover day to day expenses and to cover the bills of course, I set aside small sums of money to enjoy freely and I have my 6 month emergency fund which earns 3%... right off the bat I know that I could move this emergency fund to Nationwide and get 5% on it, which I should probably hurry up and do. I've also my 2 retirement vehicles....so I think I'm making good decisions thus far

ValiantSon

Drucifer wrote: »

I'm always trying to make the best decisions financially so I really do appreciate the advice, after I thought about what you've said in your posts it does make sense avoiding PB's, so far they've earned us nothing and has provided no real benefit to us, the money has just sat there, but actually using it to reduce the term of the mortgage has a real benefit, it guarantees paying less interest over all and reducing the term of the mortgage over all, that sounds good to me.

I keep enough cash to cover day to day expenses and to cover the bills of course, I set aside small sums of money to enjoy freely and I have my 6 month emergency fund which earns 3%... right off the bat I know that I could move this emergency fund to Nationwide and get 5% on it, which I should probably hurry up and do. I've also my 2 retirement vehicles....so I think I'm making good decisions thus far

It sounds like you are in a good position.

I'd agree about moving £2500 to Nationwide FlexDirect to get 5%, but don't forget to move it away again after 12 months because the rate will drop to 1%. You'll also get access to the 5% regular saver (£250 p/m) so cycle some money in there too, if you can. If you know anyone with a Nationwide account then it's worth asking them to recommend you so that you both get a £100 bonus.

Drucifer

ValiantSon wrote: »

It sounds like you are in a good position.

I'd agree about moving £2500 to Nationwide FlexDirect to get 5%, but don't forget to move it away again after 12 months because the rate will drop to 1%. You'll also get access to the 5% regular saver (£250 p/m) so cycle some money in there too, if you can. If you know anyone with a Nationwide account then it's worth asking them to recommend you so that you both get a £100 bonus.

I could cycle the £250p/m to the regular saver, but I'd have to sacrifice my contributions to the Vanguard ISA, would it make more sense to guarantee the 5% on £250 p/m or continue investing with Vanguard?

ValiantSon

Drucifer wrote: »

I could cycle the £250p/m to the regular saver, but I'd have to sacrifice my contributions to the Vanguard ISA, would it make more sense to guarantee the 5% on £250 p/m or continue investing with Vanguard?

That all depends on the time frame of your Vanguard investment. I assume that you aren't intending to touch it for at least 10 years (possibly longer), and therefore you are more likely to achieve a greater return through Vanguard.