Advice Please!!

dubaiscot

Hi Everyone,

I am new to the site and there seems to be a lot of good advise in here so was hoping if some of your experienced people could help me out.

My wife, son and I have been living in Dubai for the past couple of years and will be returning to the UK in January. We have a house in the UK worth about 320K, with a mortgage of about 140k outstanding. We have also managed to save while out here and have about 25K in UK bank account earning about 4.5%. Because I am non-UK resident we do not pay UK tax at the moment. We have also been overpaying our mortgage.

When we move back we are going to need some money to make some minor upgrades to our house, but what is the best thing to do nowadays with the remaining 20k? Clearly I am looking at dropping 3,600 each in an ISA - should I just sink the rest into our mortgage? Or is there some kind of savings/investment vehicle where the money would be better off? Our end goal is to pay off our mortgage as soon as possible - but this is a few years off! One idea we had was to try and pickup a buy-to-let property as there might be a bargain to be had at the moment given the credit crunch - but not sure on this.

Any advice would be greatly appreciated.

liitleblackcat

On the assumption that you will be paying UK income tax when you return, it is difficult to get a higher level of interest on savings minus tax at 20% (or 40%?) than your probable current mortgage rate, so the answer is to pay off some of your mortgage unless you want to keep the savings as rainy day money - some people suggest 3 months worth of income should be kept just in case the worst happens. Once it is in your mortgage it is difficult to get it back again.

On the other hand, if you or your partner is not paying tax when you return, because he or she won't be working, then there are plenty of places you can get 6.5% or more, which is probably more than your mortgage interest. The current view seems to be Kaupthing Edge at 6.5% - easy to open and easy to use.