Paying off interest only mortgage savings account

han2505

Hey all,

Wanting to open a savings account to pay into monthly so i can pay off however much i owe my mortgage company at the end of my interest only period comes to an end.

Wondering if anyone has any ideas of what to open? which bank or company should i go with? only wanting to pay in a max of £100.00 a month into it.

Thanks

Aegis

han2505 wrote: »

Hey all,

Wanting to open a savings account to pay into monthly so i can pay off however much i owe my mortgage company at the end of my interest only period comes to an end.

Wondering if anyone has any ideas of what to open? which bank or company should i go with? only wanting to pay in a max of £100.00 a month into it.

Thanks

Are you a tax payer? What rate is your mortgage accruing interest at? Do you have the facility to make overpayments whenever you like?

If you put money into a savings account and your after-tax interest rate on the savings account is lower than your mortgage interest rate, you are effectively losing money and would be better off overpaying on your mortgage IF you can do so without incurring charges.

You can get around this a little by saving in a cash ISA, which will generally have quite a good savings rate and will pay interest without an income tax due on it.

If you have a long time left before the interest only period ends and would be happy with a little risk you might want to consider putting some of your monthly amount into stock market or other asset-backed investments to try and get more return on your money in the long run than you otherwise would with simple cash accounts.

Have a think and feel free to ask more questions if you need to

han2505

hey,

I've got almost 3 years left on the mortgage and i cant make payments to it :-)

Someone mentioned an Offset to me as they said it wasnt worth getting an isa.

I am a tax payer though.

Dont really know about stocks though so any help would be appreciated.

Thanks

Voyager2002

For a three-year period, stocks are not a good idea.

If you are a taxpayer then I cannot imagine why it would not be worth your while to get an ISA. Read the articles on the main site.

Also check out the regular savings accounts that might be available to you: some banks will pay 8 per cent or twelve per cent on these accounts, but there are lots of tricky conditions.

han2505

i know i was thinking that.

Think i will go to my bank at the weekend and speak to a mortgage adviser and see what they say as it was another mortgage adviser who mentioned the offset (no idea what it is though) and not the ISA so no idea why.

Will have a look round, just wondered if anyone had any ideas.

thanks

Jonbvn

With GBP100 pcm, I would say a good cash ISA is the way to go. Whomever told you that it was not worth getting an ISA was WRONG!

I hope you understand that over 3 years you will only have saved about GBP4k (assuming 6% interest)?

han2505

i know but we cant afford to put anymore away, unless you have any other ideas of saving? it's only to put down for when we move onto repayment, and our mortgage adviser told us we would have only paid off about £2k in that amount of time anyway as you pay off interest for the first couple of years on the house anyway.

Thanks