Saved 5 k - put in mortgage or save ?

[ginorwine]

Mortgage is repayment and we owe 30 k
We have no savings apart from this and a ds about to go to uni followed by dd in two years
My Dh is main earner and will be 6o in 5 years
We hope that he can give his job up when dd leaves uni which should be in 5 years time - his wage will help support both at uni
However things don't always go as planned !
I am tempted to save it but my instinct is to reduce mortgage
We have 100 k equity
I do work but my earnings are v minimal and that is used to maintain and pay for car etc

[GreenSand]

If the washing machine broke tomorrow, would you need some of that 5k to buy a new one??
I'd save up 3-6 months of spending in an instant access account before paying more of the mortgage.
But, now you've got that cushion behind you, could you add a little to each mortgage payment? ie overpay by £10 or £20 a month (check your mortgage will allow this). It all adds up, but you can still access the 5k if required.

[ginorwine]

Thanks my Dh wage could cover a washing machine but nothing more £
Thanks !

[Artandco]

I would just pay off a little extra each month I think. Most allow 10 % no penalty. So say you pay £500, pay £550 from now on.

Means you have access to most the £5k if needed to pay uni rent upfront for example. I know many who's uni loan has arrived late in October but they need to pay years rent upfront in September

[SueTrinder]

I would just pay off a little extra each month I think. Most allow 10 % no penalty.

Our mortgage allows us to make as big an overpayment as we want without penalty, and we have the option of either reducing our monthly bill or of reducing the term if we've made overpayments. I know some people who have had mortgage holidays after making overpayments. I agree with the PPs that say it's sensible to have a cushion of accessible savings but depending on your mortgage putting all the money on the mortgage could still allow that. Do you have the discipline for a offset mortgage?

[ginorwine]

I'm not sure what an offset mortgage is but will look it up .
I don't think we can change from current to an offset tho as we would be charged a hefty leaving fee .. Will check .

[jillyfishy]

keep some back for rainy day as others have said. however, you should base your decision around the interest rate you are being charged by your building society. e.g. I have a low rate tracker of 1.99% and therefore i am better off to put my savings into a decent interest paying current account (i think both Nationwide and Santander offer these) i have a santander 123 current account which pays 3% up to 20k of savings. there is not much out there paying more than this. if your BS int rate is higher than 3% then you will benefit from reducing the mortgage amount. your monthly interest will be reduced accordingly. e.g i fyou have a rate of 5% your monthly mortgage payment will reduce by £20.00.by paying off £5k.