Is it wise to have an emergency fund as a 0% Card and pay down actual mortgage with savings instead.

IAMIAM

Anyone else do this based on current rates. Talking around 30k based on 175k mortgage.

theoretica

Possibly somewhere in between?  What rates are you paying on your mortgage and what can you get on savings? There are some things it is hard to pay for with a 0% card - mortgage payments for instance, if you are thinking about an emergency with a loss of income also some big bills like new cars...  But £30k is high for emergency savings - what sort of emergencies do you have in mind?  Someone with far flung family might need a different plan, for instance.

housebuyer143

The term emergency fund indicates that maybe you lose your job etc in which case you definitely should not use 0% cards to support you as you run the risk of being unable to pay it back. You also can't pay a mortgage on credit.
Best to keep cash savings also, but if £30k is just sitting in the bank losing money, then pay down some of the mortgage. 

IAMIAM

Rate is 4.28%

dimbo61

You might be able to get 5% on some regular saving deals.
However keeping 3/6/12 months income is still a good idea depending on your job.
If your a professional  in a well paid secure job then 3 months might be fine.
6 months savings might be better in an unskilled job
Now if your self employed and a one person band maybe having 12 months savings ( money ready for the tax bill or buying materials ) would be a great idea. 
I love offset mortgages and £30K on a £175K mortgage is a tidy offset amount

housebuyer143

dimbo61 said:

You might be able to get 5% on some regular saving deals.
However keeping 3/6/12 months income is still a good idea depending on your job.
If your a professional  in a well paid secure job then 3 months might be fine.
6 months savings might be better in an unskilled job
Now if your self employed and a one person band maybe having 12 months savings ( money ready for the tax bill or buying materials ) would be a great idea. 
I love offset mortgages and £30K on a £175K mortgage is a tidy offset amount

It's worth doing all the figures on offset now as it doesn't always make sense. They come with higher rates and fees and because savings rates are so good, you could actually get a normal mortgage and put your money in a savings account that is equal or almost to your mortgage interest thus offsetting it but at a cheaper rate. 

I did the numbers and it wasn't worth it unless you were offsetting the entire balance as I made similar money just putting the same money into a savings account. If you are a higher or additional tax payer that might be a reason to do it for the tax savings though.

alanyau88

I agree with house buyer however paying down the mortgage depends on your personality and how diligent you are with your money.  £30k is a good amount for a reserve fund which can be kept in an easy access Isa.  It's not only for rainy days as it can be used for hard to come by opportunities as well.  

IAMIAM

I agree about offset, there doesn't seem much point as the interest rates are much higher - although I think it 'used' to be a good idea, I even liked the idea of current account mortgages, however it now seems to be a thing of the past. 

dimbo61

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