MF Advice Please. Is this the best plan????

MF2015

Hi people, about 6 years ago I joined uni after managing to pay off the mortgage on a small house.

I bought a large one at 21 when in a good job and didn't want to waste the cash, sold that 2 years later with enough profit to buy a small house outright and spent the next 5 years at uni.

So...having now left uni and landed another job, I have had a 6 month break, blown a bit of money, got engaged (she has been with me through the hard times at uni and definitely deserves it, sorry it took 7 years!) and bought a new house with my other half.

We sold the old house and put all of the available money after paying off a few debts into the new house, and have been in a couple of months.

My aim now is to pay off the mortgage as quick as possible, we owe £90000 and have a repayment mortgage that allows a 10% overpayment over the year, fixed at 6.44% for 2 years, minimum of £500 capital overpayment.

What is the best way to the debt down?

This is my idea but feel free to add comments if you think it can be done in a more effective way;

Pay off £9000 per year ASAP for the next 2 years.

Put all other savings in to a high interest account.

After 2 years pay a lump sum off the mortgage out of savings account.

Then see what the best mortgage on offer at the time is to allow more regular overpayment's.

So what do you think? I know it's a long first post but thanks for reading.

JonnyBravo

All seems reasonable enough but please make sure you use your cash ISA allowance for your extra savings. (Tax really eats into "high interest" savings accounts esp if youre a top rate tax payer.)
At the end of the two years you may find it more profitable to keep the ISA's (paying more interest than your mortgage is charging) and then it becomes a judgement call.... doing what is truly most effective for your money or getting that satisfaction of paying more off your mortgage.

MF2015

JonnyBravo wrote: »

All seems reasonable enough but please make sure you use your cash ISA allowance for your extra savings. (Tax really eats into "high interest" savings accounts esp if youre a top rate tax payer.)
At the end of the two years you may find it more profitable to keep the ISA's (paying more interest than your mortgage is charging) and then it becomes a judgement call.... doing what is truly most effective for your money or getting that satisfaction of paying more off your mortgage.

Ok, not quite the best plan then, I don't even know how an ISA works, cash has been sitting in my current account, but as of now I'm going to find the best place to store it using internet transfers.

I work away quite a bit and want to make the interest work for me as I can only do transfers on to the mortgage over the phone, in person at a branch or via cheque. Neither method is a routine way of doing it due to world wide travel. Not possible to set up an increased DD of standing order.

jamesd

If either of you is not a tax payer you can get better interest rates than your mortgage rate by saving in their name. For some of the best rates around see the best cash ISA's list and the best regular saver accounts list.

The YBS Regular saver with no time limit and three of the Skipton BS Special Saver accounts and one of the Skipton BS Christmas Saver Issue 2 accounts look particularly useful because you can vary the monthly payments. Also look at some of the great fixed rate deals that are available and get the rates locked in now before they fall.

For tax payers you'll need to compare the after tax interest rates to the mortgage rate for non-ISA accounts. For a basic rate tax payer you need to be getting 8.05% in a taxable account for it to be better than overpaying the mortgage.