Am I too cautious?

DesertRose

I staircased to 100%, I now have:

primary mortgage £29,000 at 1.4% until April 2026
Secondary mortgage £125,000 at 3.97% until November 2027. (both 11years term)

Per month that amounts to about £1500. 

My bills come to £500/month. 

I have £5000 on a 0%interest card which I am paying off £200/month. 

I have £15,000 in savings and a take home monthly of £3200 approx. 

Once all the bills have come out, I am left with £1000 for food etc and savings. I put £300 in a FD regular saver and £400 in a Lloyd’s regular saver. 

My salary will increase in April 2027 by 10% before tax. 

What I am asking is how to best manage my money. The mortgage interest is £250 a month, should I put a chunk of my savings into it? I resent paying that in interest, and my £15,000 in savings will never make me the £250 I’m forking out in interest. 

But the savings are giving me peace of mind, I can afford to pay the mortgage for a year if anything should happen. 

I’m not sure why I’m saving £700 a month, it’s just something I’ve always done, it allowed me to put down a hefty deposit for the second mortgage, gave me a savings nest etc, but would that money be better off thrown at the mortgage?

Am I too cautious?

ACG

Your paying £250 a month interest on £154,000. 
You cant really compare that to earning £250 interest on 10% of that figure. 

I have a 2 savings accounts, one is paying me 5% and another 4.2% - these were taken out a while back and will run out soon. But my mortgage is 2.5% so it currently makes sense for me to put money into savings rather than my mortgage. 

If you can get your savings into an account that pays around 4% then having those savings is not costing you anything compared to your mortgage as one would cancel out the other (not taking into account any tax on the savings). 

silvercar

Once you reduce your mortgage you can’t get it back. Could you do anything more useful with the money eg pension contributions?

DesertRose

The savings are earning above 5%, I have a cash ISA and a nationwide members bond, the FD earns 7% and the Lloyds 5.5% I think. I see what you mean. 

I have an NHS pension I’m paying into. 

Barralad77

I’m struggling to see how the interest on the two mortgages comes to just £250 per month. By my calculations the interest is approximately £34 on the primary and £413 on the secondary, a combined total of around £447?

DesertRose

@Barralad77, I averaged the interest paid in total over the 11 years, but you’re right, it is about that in the first couple of years. Yes, the interest goes down, but all in all I’m paying about £33,000 in interest over the entire term. 

Barralad77

Not sure why you’re calculating the interest you are paying/will be paying based on historical data from the past 11 years (when interest rates have been at historical all-time lows)? Why not simply calculate the interest using (a) the current interest rates and (b) the current balances? Or have I misconstrued your reply? Even then, the balances are probably irrelevant as it’s the interest rates (on the mortgages) vs returns from somewhere else (ISAs/Investments, etc.). If, next  April, the former average out at (e.g.,) 4% but you can secure more than that elsewhere then put the money elsewhere and make it work for you more effectively.