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pay money off mortgage or put in high savings account
sassybooboos
Posts: 336 Forumite
just sold my house and reduced my mortgage from £140000 to 78000.
i am going on a 3 yr fixed and can over pay £1500 per year but would it be better to put any extra money into a high interest account and then use it to put down on a new mortgage in 3 yrs time to bring my mortgage right down then. there is a redemption penalty on my new mortgage so i dont know how it affects this if i overpay.
ideally would like to be mortgage free asap.
i am going on a 3 yr fixed and can over pay £1500 per year but would it be better to put any extra money into a high interest account and then use it to put down on a new mortgage in 3 yrs time to bring my mortgage right down then. there is a redemption penalty on my new mortgage so i dont know how it affects this if i overpay.
ideally would like to be mortgage free asap.
0
Comments
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1) What is your interest rate for your fixed rate mortgage?
2) Are you a high tax payer?
3) What rate of interest are you likely to be paid for your savings?
4) Do you have any other savings or could you need the money in the event of an emergency?
If your mortgage interest rate is higher than the savings rate (after tax) and you don't need to access the money in future, then overpay your mortgage.
If not, put the money into an instant access cash ISA - Martin has some suggestions here
Thanks to MSE, I am mortgage free!0 -
mortgage offer come back today at 5.64% for 2 years. cheaper than the kfi.0
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Basic rate taxpayer needs to earn above 7% on savings to better the 5.64% mortgage rate
Higher rate taxpayer needs to earn above 9.4% on savings to better the 5.64% mortgage rate.
From Martin's guide to when to overpay/when to save in mortgages
http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings#payingMember of the first Mortgage Free in 3 challenge, no.19
Balance 19th April '07 = minus £27,640
Balance 1st November '09 = mortgage paid off with £1903 left over. Title deeds are now ours.0 -
However, you can easily beat your mortgage rate with cash-ISA's. Therefore, I would suggest you fill-up your cash-ISA's then think about overpaying.Basic rate taxpayer needs to earn above 7% on savings to better the 5.64% mortgage rate
Higher rate taxpayer needs to earn above 9.4% on savings to better the 5.64% mortgage rate.
From Martin's guide to when to overpay/when to save in mortgages
http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings#payingIn case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:0 -
I also think cash ISAs are better than overpaying at the moment. If you overpay the money is gone for ever. You could remortgage, but if house prices go down you may not be able to. At least if you have plenty of ISA cash you can ride out any emergencies.
The difference between cash ISA and mortgage rates right now is pretty negligible anyway.0
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