/ savings advice

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colina - on 04 Apr 2013
ok .if you came into a little money and had an option of paying off a bit of your mortgage or putting it into a savings account ,
wot would you do?


nb,the intersest gained in a savings account equates roughly to the same as the reduced mortgage payments. so financially not a lot in it.
In reply to colina: Depends

For example, If you drive a clapped out banger that is about to die you might consider savings to maintain your liquid cash.

If you've just bought a 62 plate with full service and warranty then maybe the mortgage route.

So it is down to the individuals circumstances, not just mortgage debt versus savings interest rate.
Jim C - on 04 Apr 2013
In reply to colina:
> ok .if you came into a little money and had an option of paying off a bit of your mortgage or putting it into a savings account ,
> wot would you do?
>
>
> nb,the intersest gained in a savings account equates roughly to the same as the reduced mortgage payments. so financially not a lot in it.

My view would be interest rates on a loan can go up, and the return on savings might not do so, I can then end up paying a lot more over time than I will have gained in interest, so I would pay off all my debts whilst the interest rates I am paying are low, and when returns on savings are also low.

Nick Russell on 04 Apr 2013
In reply to colina:

invest in climbing gear. That shiny new set of cams/screws will pay dividends!
The Grist - on 04 Apr 2013
In reply to colina: Live dangerously. Buy a motobike.

But a more serious suggestion would be pay off the mortgage. I have the same dilemma at the moment and it is what I am going to do. The return on savings is poor at the moment. It can do no harm in the long run paying it off quicker. That is unless you may need the money in 6 months in which case saving may be the safer option so long as you have access to it.
stubbed on 04 Apr 2013
In reply to colina:

Although the interest rate on your mortgage is low, you are borrowing money generally (this might not be the case for you) for a longer period of time - e.g. 25 years. So if you are going to leave your money as savings for that long, there might not be much difference, but if you might need to spend it (on a car or something) you should consider the timing.

However, you generally pay your mortgage after tax. But if you invest in a pension you can get the tax back (more significant if you pay higher rate tax obviously).
Ian Patterson on 04 Apr 2013
In reply to stubbed:

As ever depends on individual circumstances, However the first question to ask is whether uyou already have some savings. If you haven't got a the equivalent of 3-6 months income in relatively accessible savings then I would save rather pay the mortgage - it's always good to have something available for changes in circumstance / unexpected events.
Fraser on 04 Apr 2013
In reply to colina:

As IP suggests above. Assuming you already have some form of nest egg, I'd definitely pay towards the mortgage.
New POD - on 04 Apr 2013
In reply to colina:
> ok .if you came into a little money and had an option of paying off a bit of your mortgage or putting it into a savings account ,
> wot would you do?
>
>
> nb,the intersest gained in a savings account equates roughly to the same as the reduced mortgage payments. so financially not a lot in it.


This happened to me, and I paid off some of the mortgage, but wished I'd paid it all off, because the portion I'd saved for my kids uni fund meant that when I was made redundant I'd get NO benefits at all.

As soon as I got a job, I paid the whole lot off, and started saving the monthly payment.

Mark Collins - on 04 Apr 2013
In reply to colina: mortgage.
Will Legon - on 04 Apr 2013
In reply to colina: I've been helping my dad sort his finances ... Hence I'd bung as much as I could into an ISA - Halifax are offering a three year deal for 3% at the moment - if you save 5640 before tomorrow and then another 5640 next week that would take care of the first 12k or so. Then the rest I would pay off the mortgage. (If your mortgage rate is higher than 3% then pay all money into that).

Will

dunc56 - on 04 Apr 2013
In reply to colina: Get an offset mortgage and you get the best of both worlds.
The New NickB - on 04 Apr 2013
In reply to colina:

Saving will give you more flexibility, but remember to include tax in the equation if you have used up you allowances.
The New NickB - on 04 Apr 2013
In reply to dunc56:

Apart from the hassle, the arrangement fee and potentially higher interest rate.
colina - on 05 Apr 2013
In reply to The Grist:
> (In reply to colina) Live dangerously. Buy a motobike.
>
>
already got a motorbike !
colina - on 05 Apr 2013
In reply to Jim C:
> (In reply to colina)
> [...]
>
> My view would be interest rates on a loan can go up, and the return on savings might not do so, I can then end up paying a lot more over time than I will have gained in interest, so I would pay off all my debts whilst the interest rates I am paying are low, and when returns on savings are also low.

didn't think of that scenario jim ,mortgage interest rates may well go up and savings interest may stay the same .thanks for that ,that is most definatly a major factor.







UKC Forums - on 05 Apr 2013
This thread was started in the ROCKTALK forum and has now been moved.
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Ben Sharp - on 05 Apr 2013
In reply to colina: Why not invest? Cocaine smuggling and gun running are hot at the moment. Pay the mortgage off in full, buy a mansion etc.
John_Hat - on 05 Apr 2013
In reply to colina:

This question has been asked before on here, and my advice is always the same - sit on it for six months and do nothing with it.

Lump Sums don't come along that often in life, and its worth making absolutley sure what you want to do works. In any case it will be different for everyone.

e.g. We have a mortgage which is an (old) base rate tracker, currently paying as-near-as-zero percent as makes no odds. However we also have a credit card balance (at 0%) and several big house projects and are getting married next year. Gawd knows what we'd do - probably put it towards the wedding, to be honest.
JJL - on 05 Apr 2013
In reply to colina:

1. Pay off any high interest debt (credit cards, loans)

2. Consider (really hard) how much flexibility you need. What are the odds of losing your income? What are the odds of needing the money unexpectedly for whatever reason?

3. If you don't need flexibility, pay down mortgage (but leave a residual 50 or so for credit rating purposes).

4. If you do need flexibility, look at remortgaging to an offset deal (e.g. HSBC 3.49% fee free). This is a straightforward comparison of costs versus where you are now.

NB. Offset deals generally not best idea as the rate is slightly higher than you might get elsewhre and applies to a much larger sum than the notional savings. However the market is doing funny things at the moment and being a saver/investor isn't a happy place on the whole. FWIW I've decided to become a net borrower again (after 30 years of no mortgage), but done so in a way that allows me access to the capital.

Usual disclaimers apply: This is not advice, merely observation; you don't know me; I'm not an IFA; you should see an IFA; shares/rates and toilet seats can go down as well as up; you may lose your children if you do stupid things, or even things that seem stupid only in retrospect; my view of risk may not match yours; do your own research; etc. etc.




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