Pay lump sum onto mortgage or put in high interest account?

JulieH

hi all, my husband has just won a large sum of money through spread betting and we're wondering how best to 'use' it (I have my own ideas!). Basically we were wondering whether we're better off paying it towards our mortgage, or whether it would be better to put it into a high interest account until we decide to move (which we probably will in the next few years) and use it as a deposit. We would need to look into the mortgage as we're pretty sure we can only pay a certain amount per year over and above the norm.

Any suggestions greatly appreciated!

jill2002

It is likely that you are paying more interest on your mortgage than you could get in a high interest savings account (and probably paying tax on this too). So it would be better if the lump sum was paid off your mortgage. But you need to check that there will not be any penalties to pay - talk to your lender.

As for saving the money for a deposit - by putting the funds into your mortgage account will mean you owe less and therefore have more equity in the property, which will then be used as a deposit on your new property.

chriswave

just a word of warning, if he wan a big amount of money through spread betting, the chances are that he could have (and maybe has) lost an awful lot of money. I would make sure the money was locked away asap and remember it's not losing thats addictive...

JulieH

That's great thanks. As it happens our fixed term ends at the end of April. Until then we can't pay much above the standard payment but once it ends we can - so will probably do that.

With regards to losing - don't worry we're both well aware that it could all go, hence the need to do something with it quickly before it does! My husband has been doing it for years for tiny amounts (I'm talking £1 or £2) and has only recently ramped it up getting braver.

Thanks for the advice.

Trying_to_be_good

Make sure you have enough 'emergency' savings - 3 to 6 months' income is recommended - then use the excess to overpay the mortgage. You don't want to have to be borrowing more money back if something expensive needs fixing. What a lovely decision to have to make, though!