Is this okay to do? (Mortgage deposit)

ftb2020

hi, just after some advice

we are exchanging contracts this week on a new build property. We are continuing to save our deposit until completion (Nov/December). The savings are currently sat in a isa topped up by my salary each month and won’t make much interest as the rate is so low. 

I was thinking or putting the savings into premium bonds until I have to withdraw them for the mortgage - is there any issues with me doing this or is it simply a case of I’ve moved them from one savings account to another?

I’m assuming you can cash out whenever?

bowlhead99

If you buy premium bonds you can cash them out whenever.  It may take 2-3 days to receive the money back in your current account. As the drawing is only once a month at the start of the month, if you know you will need the money back before the next drawing, you might as well remove the money - they don't pay daily interest, just a prize draw once a month as long as the money has been invested in the bonds for a full month by the time the draw happens.

ftb2020

bowlhead99 said:

If you buy premium bonds you can cash them out whenever.  It may take 2-3 days to receive the money back in your current account. As the drawing is only once a month at the start of the month, if you know you will need the money back before the next drawing, you might as well remove the money - they don't pay daily interest, just a prize draw once a month as long as the money has been invested in the bonds for a full month by the time the draw happens.

So the solicitor etc shouldn’t have a problem with us moving the money from the isa to bonds and withdrawing just before we have to pay the deposit ?

george4064

ftb2020 said:

bowlhead99 said:

If you buy premium bonds you can cash them out whenever.  It may take 2-3 days to receive the money back in your current account. As the drawing is only once a month at the start of the month, if you know you will need the money back before the next drawing, you might as well remove the money - they don't pay daily interest, just a prize draw once a month as long as the money has been invested in the bonds for a full month by the time the draw happens.

So the solicitor etc shouldn’t have a problem with us moving the money from the isa to bonds and withdrawing just before we have to pay the deposit ?

Firstly, you solicitor doesn't need to know as long as you make damned sure you have your deposit ready when it is required.

If you told your solicitor what you plan to do with your deposit for those few months he/she may say to just keep it in an instant access account, but I don't think your solicitor could actually STOP you from sticking the money in premium bonds for a few months.

steampowered

The effective interest rate on premium bonds is 1.4%. It hardly seems worth doing for the sake of a few months at that rate.

triplea35

Are you first time buyers. Have you considered a LISA?
 

MrMorgan

triplea35 said:

Are you first time buyers. Have you considered a LISA?
 

You have to have a LISA open for a year before using it... wouldn't be enough time

Notepad_Phil

Remember that you miss the first full month of having the premium bonds in the prize draw. So even if you manage to get the premium bonds today (30th June) then they won't take part in the draw until August. If it were me then I'd probably just keep the money in the best instant access account I could find (and maybe use some of the regular savers that allow access before the year is up) as the rate would probably not be far away and might even beat what an average winning rate on premium bonds would give.

eskbanker

Notepad_Phil said:
Remember that you miss the first full month of having the premium bonds in the prize draw. So even if you manage to get the premium bonds today (30th June) then they won't take part in the draw until August.

For those in a position to buy PBs late in the month, the effect you refer to is negligible - nobody ever highlights that if you put money into a monthly-paying savings account on 30th June, you won't get the interest until the end of July, i.e. both returns are paid in arrears....

Notepad_Phil

eskbanker said:

Notepad_Phil said:
Remember that you miss the first full month of having the premium bonds in the prize draw. So even if you manage to get the premium bonds today (30th June) then they won't take part in the draw until August.

For those in a position to buy PBs late in the month, the effect you refer to is negligible - nobody ever highlights that if you put money into a monthly-paying savings account on 30th June, you won't get the interest until the end of July, i.e. both returns are paid in arrears....

On reflection I should have said that if the money is not in today then it won't take part in the draw until September.

My intention was to note that when the money will only be in the premium bonds for a few months then missing parts of a month when you either don't get the money in on time (or out at the beginning of a month) is likely going to be more than a negligible amount of 'interest' lost compared to a more usual account.