Invest/ pay off mortgage what to do

[Wudgy]

What do you think would be best use of £50k currently sitting in a saving account, pay off towards mortgage ( currently 90k remaining ) premium bonds, investing, s%s isa??
Ideally would like to move to a larger house and use this money towards it as will be increasing mortgage too but currently no house options available within price range / area. Should we keep the money in bank until it’s possible to move( could be a few years) or do something with it as mentioned above. Thanks in advance

Depends on when you need the money.

If in the next 12 - 18 months, I'd stick it in Premium Bonds.

Don't put in S&S ISA unless you're investing for next 5 years plus.

I probably wouldn't use it to pay down the mortgage.

Unless you are close to the next level LTV and are looking to remortgage then I would keep it in the bank.

If close to the next level and can cut payments then I would use a bit of the amount to do this find a cheaper mortgage then continue paying what currently are. This way you reduce the your mortgage still have the bulk of the money for a deposit/reduce mortgage payments on next place and have brought down the current mortgage by reducing the interest and paying back more.

If you're not moving for a few years then I would reduce mortgage and keep saving. Interest rates on the floor. If you move soon then keep for estate agents, solicitors and stamp duty

What interest are you getting in your savings account?
What interest are you paying on your mortgage? Can you over pay penalty free?
Do you have another savings account with 3-6months of living expenses in it (in covid times, probably better to err nearer 6 months)?
When would you like to move?

Change your mortgage to an offset mortgage, you’ll keep your cash, whilst reducing the interest payable on your mortgage. Essentially, you would only pay interest on 40k mortgage. Best of both worlds. You can use that saving to then overpay on your mortgage. We saved significantly by doing this.

You need to distinguish between a purely financial calculation and broader considerations.

Well, obviously if the cost of your debt is < than the return you get from another investment, you'll be better off NOT repaying the debt but investing at the higher rate.

No point in paying down a loan at 1.5% if you can invest somewhere else at, say 2% (post tax).

That's in theory - in practice, can you? With ultra-low interest rates it's very hard to find safe investments (eg saving accounts) that yield more than the mortgage costs you.

There are people who intentionally do not repay as much of their mortgage as they can, and invest extra savings in riskier investments (e.g. the stock market); they are effectively betting that the return of the stock market will be higher. There is a decent chance (but no absolute certainty) of this happening in the medium to long term (7+ years) but, if you have an horizon of a couple of years, it's too risky.

In broader terms, you also have to think of how much the extra flexibility is worth to you. Once you put money in your house by paying down your mortgage, it's harder to borrow it again. If instead you leave it in a saving account, it's immediately accessible if you need it in an emergency.

Eg say you lose your job or you have to incur an unexpected expense (the car breaks down, problems in the house, whatever) - in those cases having easily accessible funds would probably be better.

Depends upon your job security and the timescale for house moving.

investing / ss isa you need to take a long term view. Risky to invest it now and just assume it will grow in two years. I put money into ISAs and expect a rocky start in the hope for a long-term gain (obviously fund-dependent).

I would argue at the moment that the interest rates you get on savings are diabolical and so I would use some to reduce your current mortgage payments. The rest you can keep saving.

Thanks So much for all Responses so much to consider!

Premium bonds are terrible for most people, very few make anything these days. All depends how old you are and how much 50k is to you. Personally I’d probably invest in a couple of funds. Get the first £20k into a stocks and shares isa before the end of this fy and the second in mid April. Keep £10k as cash or pay down mortgage depending on other access to cash/credit.

£40k reduce mortgage and £10k s&s isa.

Im also overpaying mortgage and investing at a similar ratio to the above.

Once you're mortgage free, then probably look at investing slightly more or putting the remainder ins NS&I bonds.