Pay towards mortgage or put into savings

jackie_w

Hi There Im looking for some advice.

DH is due to get a substantial amount as a dividend from his company (hes self employed). He is going to seek advice from an IFA as to where is the best place to put this money. We currently have approx £7500 savings seperate from that.

We have large mortgage (£189,000) which we took out last year, and I personally would like to see this reduced. I know we can make overpayments up to 10% per year. I was saying to DH that I would like to start doing this because I feel with the amount he is going to get from his company dividend that we shouldnt really need to put any more money by in our savings pot, but, hes not so keen.
He wants to keep saving money, rather than putting it towards our mortgage.

What would you suggest or whats the best way to think about this?

Jackie

cupid_s

I suppose the simplest way is to compare the interest rate on your mortgage, to what you can get in interest on savings (after tax)

dimbo61

as cupid-s has said check the interest rate you are paying on your
mortgage and if you can earn more interest in this years ISA ( barclays and tsb paying 6.5% ) 2x£3600 from april.
Having more than £16,000 in savings would affect any claim to benefits if DH
lost his job !!!
But if you can overpay on your mortgage it will save you thousands of pounds in the long run GOOD LUCK

Dithering_Dad

It's a shame you have only just sorted out your mortgage because I'd have advised you to get an offsetting mortgage. I'm a contractor too and I pay all of my emergency savings and tax money (for my dividends) into the offset. I get the benefit of offsetting the mortgage interest with the tax money I have to pay to the government.

It also means that if work dries up a bit, I can dip into the offset for our monthly outgoings until I get my next contract. Offsetting seems almost purpose bult for contractors - it's just a shame we can't save our corporation tax in there as well