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Find financial and money saving discussions including debt and pension chat on our Money forum.

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Find financial and money saving discussions including debt and pension chat on our Money forum.

Money matters

If you had £7k would it be a better idea to put it into your mortgage

38 replies

ssd · 26/08/2006 21:39

or keep it in a savings account?

would you be able to get it out of your morgage at a later date if you needed it?

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UrsulatheSeawitch · 26/08/2006 21:42

Money-saving Martin had a bit about this recnetly - for credit card debt it's better to pay it off but with a mortgage I guess it depends on your interest rate; but you wouldn't be able to get it back out unless you had one of those felxible deals, so if you may need it in the future I think you'd be better to put it in savings.

I'll just see if I can find Martin's bit.

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UrsulatheSeawitch · 26/08/2006 21:44

It's here .

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ssd · 26/08/2006 21:44

thanks ursula, I love martin I get his e-mails, I must have missed this one!

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SenoraPostrophe · 26/08/2006 21:45

yes - depends on your interest rate and any penalties you might pay to pay off early. and no, you'd have to remortgage to get it out again - but how likely is it that you'll need to?

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SecurMummy · 26/08/2006 21:46

Get a proper independant financial adviser, explain what you want to achieve. Putting it in a savings account will earn less interest than your mortgage costs IYSWIM so effectivly you would be losing money doing that, however very few mortgages allow you to both overpay and withdraw overpayments leter - but they do exist. Something like a Maxi ISA would earn you better interest and you can get it back if you need it - if you are not already using your allowence that is.

Many adviser also do mortgages (based on the whole market place) this would (IMO) be your best port of call.

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moondog · 26/08/2006 21:47

ISAdeffo
{If mortgage manageable}

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SecurMummy · 26/08/2006 21:48

Just to reiterate, there are mortgages that allow you to withdraw overpayments.

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SecurMummy · 26/08/2006 21:48

Just to reiterate, there are mortgages that allow you to withdraw overpayments.

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bananaloaf · 26/08/2006 21:48

think i woul try to place it in a high interest account that are fixed for a year. some internet account are high interest. you could put it in a isa.

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ssd · 26/08/2006 21:56

ursula, have you watched the clip of the older couple with Martin? Jesus, I'm sorry but are they thick or what? They have savings if £87k and a morgage of the same and instead of using even some of the money towards the morgage they are earning 1.5% in a savings account.

Don't think they're for real actually.

Anyway!! I think I'll check out flexible morgages, thanks!

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blueshoes · 26/08/2006 22:02

It also depends on whether you are a taxpayer and if so, basic rate or high rate. If you pay tax on other income, bear in mind any interest you earn is subject to tax, whereas interest saved by mortgage overpayments are not.

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SecurMummy · 26/08/2006 22:05

blueshoes, that is dependant on how you invest the money - which is why you should get advice on things like this. Most IFAs do not charge for advice (and you should avoid those that do IMO!) so it is free to get someone who has all the facts at hand to tell you what to do - rather like having a soliciter at all times for nothing! (how good would that be!)

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UrsulatheSeawitch · 26/08/2006 22:13

But bear in mind, ssd, that an IFA who doesn't charge has to get his money from somewhere, and if it's not from you then it's in commission from the companies whose products he sells you; and is he going to sell you the best product for you or the one that makes most commission for him...???

I hadn't watched that clip, but I just did, and agree completely with your comments (just wish we'd seen the bit that led up to the bloke's phone call, I have a horrible feeling that he was ringing about a loan to buy that car )

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crunchie · 26/08/2006 22:22

IMHO £7k off a mortgage is not going to alter monthly payments THAT much. Therefore I would not put such a small (not really small, but will make a difference of probably less than £50 a month) I wold look at investing the money. An ISA is one option, bu you could also look at some sort of shares, perhaps a unit trust or something.

Howeverteh other option s tolook at your mortgage and see if you are on the best possible deal (if you have had the mortgag for more then a few years you probably aren't The you could look at a remorgage and use the £7K then.

But £7K i a useful amount to have in savings 'just in case'. Martin Lewis may think I a mad but I have a mortgage AND about £20K in shares/peps etc.

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SecurMummy · 26/08/2006 22:41

Ursula, it doesn't quite work like that. It is against the law for an IFA to do that, if you go to a reputable one then you will not suffer from these things. There are very strict guidelines about how much commision someone is allowed to earn from products so that one is not any clear advantage over another, also there is lots and lots of rules about how you offer advice, it has to be shown that what you are recommending is in the customers best interest, also they have to disclose to you how much commision they are earning etc. FWIW - the ones who charge fees do also get commision, they are often getting paid at both ends of the deal - which is why you should avoid them unless you know what you are doing (some offset commision over fees etc, but it can get complicated)

A few years ago things were really bad and the industry still suffers from the hangover of that, but Financial Advisers are not used car salesmen any more.

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SecurMummy · 26/08/2006 22:45

Actually, Ursula, I am really saddened to see you type that - you are one of the people I really respect around here for being level headed about things and I am surprised that you would hold such an outdated opinion - much less publish it.

Oh yes, the story about the couple with savings andmortgage? Thoes people do exist, lots of them and many of them you cannot convince to behave any other way, simply because they feel secure, they can get the cash if they want it, they can pay off the mortgage if they want too and they feel happy. They are willing to pay (through lost interest etc) in order to keep that feeling of security.

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SecurMummy · 26/08/2006 22:46

Oh Sxxx Ursula, sorry, that was a bit harsh. Can you tell I have come across that view before once or twice

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SenoraPostrophe · 26/08/2006 22:50

an "outdated view"? so why are there so many endowment/pension mis-selling cases in the pipeline then?

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SenoraPostrophe · 26/08/2006 22:51

sorry, but a whole industry doesn't clean itself up that quick.

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SenoraPostrophe · 26/08/2006 22:53

... but that probably sounded harsher than I meant it to. there are honest used car salesmen you know!

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SecurMummy · 26/08/2006 22:56

Oh SP, those are for things which were sold years ago, please, surly anyone can work that out??

FWIW, the people selling them actually didn't know there was any problem with them either (ie the actual Financial adviser who was sat in front of you) It was the companies providing them that were in the wrong - hence why the compo comes from teh companies not the advisers (which it would if it was their fault).

Oh yes and "few years" was a turn of phrase, but yes the whole industry has had to turn around Toot Sweet as the tightning up that followed that fiasco has been huge. An amasing number if advisers just left the industry because the exams they were required to complete just to carry on doin gthe same job were so stringent.

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SecurMummy · 26/08/2006 22:56

So did that - Iappologise.

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UrsulatheSeawitch · 26/08/2006 22:58

Sorry, secur; but we were sold a relatively short-term (12 years) endowment mortgage by someone we knew and trusted, despite my trying quite hard to argue for a repayment one; it was for only £15.5K but still came in c £1500 under target

Granted that was about 15 years ago but this guy worked (and still works) for a well-established company. So I am cynical about IFAs.

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SecurMummy · 26/08/2006 22:59

PMSL - look at me telling people off for lambasting an industry based on outdated stuff - my method? Oh yes, to lambast an industry based on outdated stuff.....

I am on top form tonight!

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Gobbledigook · 26/08/2006 22:59

All depends - I'd put it on my mortgage because we can overpay without penalty and we can also withdraw up to our 'facility' if we want to.

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