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Original poster

Keep as savings of pay bit off mortgage??? WWYD

14 replies

sumum · 05/03/2011 13:22

My dh and I cannot agree what to do with his redundancy payout (£6k).

he wants to pay it off our mortgage (currently £47k with 18 years to go)

I want to keep it for rainy day, ie home improvements, changing car at some point.

We have no other davings.

We have no other debt.

He has a new permanent job (well as permanent as any is nowadays)

Our incoming pay for outgoings ok but with no scope for savings.We cannot afford holiday's abroad or anything like that, own a very old car. But we are comfortable.

WWYD or what have you done

OP posts:
Original poster
sumum · 05/03/2011 13:23

We have no other 'savings'

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Original poster
sumum · 05/03/2011 13:30

Really cannot type today. Title should say

Keep £6k as savings OR pay a bit off the mortgage?

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nymphadora · 05/03/2011 13:38

Keep it as savings as a safety net. If you have an offset morgage that would be ok but you are supposed to have 3-6 months salary in case of redundancy etc.

Hardandsleazy · 05/03/2011 13:39

What nymphadora set- if you can put it in an isa you could ave tax on interest too

Original poster
sumum · 05/03/2011 14:34

Thank you.

I shall look into offset mortgage, we just have a repayment atm.

Anyone else got an idea?

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LemonEmmaP · 05/03/2011 14:45

I would suggest keeping it as savings; however, if you do decide to pay it off the mortgage, it is worth researching how and when to do so as some lenders ignore any lump sum payments until a fixed date each year, so you could end up with the money sitting in your mortgage account but making no difference to your repayments until the fixed date next rolls around (often January 1st so a long wait!). Also check what charges would be made by your lender - more likely if you're on any kind of discounted or fixed rate at the moment. But personally I would say that you should keep it as your savings.

AnnoyingOrange · 05/03/2011 14:45

I'm a firm believer in having savings. It gives me peace of mind

Earlybird · 05/03/2011 14:55

How does the salary of his new job compare to salary of the old?

Do you struggle to make ends meet or are you reasonably comfortable?

Are you likely to have any 'big' expenses coming up - home repair, car repair, etc? With no existing savings (apart from redundancy payout), how would you/did you manage unexpected expenses?

Asking because some sort of insight into how you manage your existing budget is relevant.

Original poster
sumum · 05/03/2011 19:07

We have really struggled in the past few years as have been paying debts off.

The car is seviced regularly and we had to have a loan to buy it but there shouldn't be major problems with it, some repair expenses are built into our budget each year around mot time.

We go for cheap uk hols and did manage disneyland paris last year(got a good deal)when I got a bonus from my job (£1000)

However my income can go up and down, and I worry if I can't bring as much in as I am now.

We are not struggling now but don't like to waste or fritter money away.

We have sat down this afternoon and had a look at the offset mortgages and think that may be the way to go.

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Tsil · 05/03/2011 19:11

We have an offset mortgage and every spare penny goes in there. Our outlook is that if we both lost our jobs and owned house outright then it wouldn't be as much as a worry as at least we would have a home/asset to sell.

My DH is obsessed with being mortgage free so it would go off mortgage.

Earlybird · 05/03/2011 19:43

Are you now debt-free (apart from the mortgage)? If no, what sort of rate of interest are you being charged on the debts?

What is the interest rate on your mortgage?

You know your family dynamics regarding money - if you set aside a sizeable portion of the redundacy money, would it stay in savings (and really only be used for emergencies), or would it burn a hole in your pockets and slowly dribble away?

I'd be inclined to put most of the money toward the mortgage, but keep some (£1500 or so?) liquid for unexpected expenses and/or emergencies.

By the way - don't forget to account for any tax your dh may owe on the redundancy payout.

Chil1234 · 06/03/2011 08:32

I agree with Earlybird about comparing interest rates. Savings account interest is very poor value at the moment when compared to the interest most mortgages are charging.

I'd use maybe half the money to pay a chunk off the mortgage capital, save the rest as a rainy day fund but go through income/outgoings budget and set up a regular savings plan going forward. Once you've saved up a reasonable amount, pay another lump sum off the capital.

Relatively small amounts paid off your mortgage capital can reduce the term substantially and save you a small fortune in interest. It's worth doing the maths.

PinkWinged · 06/03/2011 17:23

Spend half (pay a bit off your mortgage)and save half (in an ISA) for a rainy day.

Original poster
sumum · 07/03/2011 09:45

Thank you everyone.

we have decided to spend some on home improvements and use the rest to set up an offset mortgage or pay off a lump of the capital.
Our fixed rate is due to finish in september.

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