Pay off mortgage or save?

bianchigirl

Hi all,

First time poster, sorry if I've put this in the wrong place/repeated a question 🙈 please be gentle!!

I have a chunk of money, £10k, from a previous property sale and I'm trying to work out what's best.

I have a mortgage of £76k at 2.14% and a regular savings account (linked to Santander 123, paying 5% annually but I can only pay in £200pcm)

Am I best paying a chunk off the mortgage or just drop feeding my savings?
Any input would be great

:j

Thanks
:money:

*aiming to he mortgage free be 40*

teameffort

Hi bianchigirl

Have you checked with your mortgage provider if you are able to over pay your mortgage without penalty?

Most mortgage lenders allow borrows to overpay by up to 10% of their mortgage balance each year. Anything over this and there may be an additional charge which would negate any benefit you'd get from over paying so I'd check with them first.

If they allow an over payment of say 10% you could chose to pay that off the mortgage and then seek out another 5% savings account for the rest, if you think you may need access to the funds in the near future, best of both worlds then.

Are you saving for anything in particular?

Teameffort

bianchigirl

Hi Teameffort,
Thanks for replying.

I specifically took out a mortgage with no penalties as I know I'm likely to be posted next year with the Army, and I wanted to overpay as much as I could.
I haven't really got much in savings, as I've always put everything into paying things off, mainly because the rates have meant it makes more sense.

teameffort

that's great news that you have the freedom to over pay on your mortgage.

What you plan to do with your house if you are posted elsewhere. Are you planning to rent it out for example as you may find that getting to a lower LTV will help with securing a BLT mortgage.

Martin suggests having 3-6 months worth of expenses saved as an emergency fund and therefore it's best to have this in an account that's easy to access if needed. So having a regular saver is great but we've found having access to our emergency fund in a current account that pay interest (currently 5%) is handy. We just make sure that the debit card is kept at home :-)

bianchigirl

It really depends what the markets doing whether we sell or rent.

Can I ask which account that is please?

Thrugelmir

bianchigirl wrote: »

Am I best paying a chunk off the mortgage or just drop feeding my savings?

Do both. Advisable to have emergency savings. Likewise pay down the mortgage. Then you cover all bases with flexibility should financial circumstances change for any reason or an unexpected cost arises.

teameffort

Yes no problem

Nationwide have a current account which pays 5% on balances up to £2,500 for 12 months. You need to pay in £1k per month, however we recycle this between accounts. If you open this account you also get access to their regular saver account which also pays 5%.

TSB also have a current account which will pay 5% interest on balances up to £1,500, for this you need to pay in £500 a month.

The good thing about these accounts is you do not currently need to set up any direct debits to get the interest thou this may change.

bianchigirl

I actually have the TSB one too, with the full 1.5k in, though I wasn't aware I had to pay in 500pcm!

Thanks for the top tips ��

teameffort

bianchigirl wrote: »

I actually have the TSB one too, with the full 1.5k in, though I wasn't aware I had to pay in 500pcm!

Thanks for the top tips ��

If it's the Classic Plus account you also need to sign up for paperless statements too, which can be done online.

No worries, happy saving