6k - pay down mortgage or put into savings?

[richatnort]

My company shares are maturing next month and I am due to get about 6k back. We have some savings to one side so I’m wondering if I whack it in a savings account for a year or 2 or pay off a bit of the mortgage.

Mortgage doesn’t renew until 2025 but we’re on a rate of 1.53% on a 280k mortgage so I am tempted to whack more of the mortgage down to help when we come to renew we’re not paying tons.

Just wanted to get the PH financial advisors view on things.

[stanlow45]

1.53 on the mortgage or vastly more in an instant access saving account to begin with. I’d say don’t pay down the mortgage while the rate is lower than a cash savings account. (Or ISA depending on tax situation).

[Philvrs]

If you can trust yourself not to whittle it away on crap, just leave it in a savings account until remortgage time then use it.

If you can’t trust yourself to not spend it…….seek help

[hyperblue]

I don’t get these threads… would you like 1.53% return on some cash or 3 or 4 times more by stuffing it into a savings account?

[Super Sonic]

Or buy a Civic type R?

[stanlow45]

Super Sonic said:

Or buy a Civic type R?

Mx5?

[Percy Cushion]

If your company shares have generated £6k, why not reinvest in your company?

[ar-em-en]

I'd lock it away in a fixed rate saver then decide closer to the time, assuming your income and tax allowances on savings interest works to your benefit.

[gangzoom]

As others have said don't pay off the mortgage till the cheap rate ends, income inflation is essentially reducing your mortgage for you. Fixed rate ISA are now over 5% I think, stick it in there for the next 2 years and than decided what to do.

[PositronicRay]

hyperblue said:

I don’t get these threads… would you like 1.53% return on some cash or 3 or 4 times more by stuffing it into a savings account?

Financially sensible, but physiologically nice to chip away ar debt.

[rossub]

hyperblue said:

I don’t get these threads… would you like 1.53% return on some cash or 3 or 4 times more by stuffing it into a savings account?

Me neither. I’m furiously saving to be able to pay the mortgage off when the current term ends. Not one penny is going against the mortgage itself - it’s all earning at least 5.1%

I’m already getting more £s in savings interest each month than I’m paying out in £s on mortgage interest. Big win!

[duckson]

Savings is the obvious answer.
Although take into account your earnings with the £500/£1k tax free interest allowance (annything outside ann ISA) and if you are currently earning interest on current savings.
Also any High Income Child Benefit Charge (if you or your partner are earning over £50k Pa gross) that you would need to add the interest earned to (ANY interest! Except ISA interest).
Personally I’ve £42k maturing from a one year fixed saver next month with my 1.59% £42k mortgage finishing next May so I’m sticking the £42k in Premium Bonds for 5 draws, I also have to pay a 2% redemption cost if I paid the mortgage off next month so it works out I’d save ~£500 (redemption minus mortgage interest paid) plus premium bonds winnings in that time period if I leave it until May.

[Man of gas]

PositronicRay said:

hyperblue said:

I don’t get these threads… would you like 1.53% return on some cash or 3 or 4 times more by stuffing it into a savings account?

Financially sensible, but physiologically nice to chip away ar debt.

Physiologically maybe not but psychologically I get ;-)

[anonymous-user]

PositronicRay said:

Financially sensible, but physiologically nice to chip away ar debt.

This, my mortgage is currently at 2.84% but I still overpay by the maximum 10% per year. I just want the fker gone now, bored of having to worry about interest rates and having to reorganise the mortgage every 2 or 5 years.

[NowWatchThisDrive]

But you're not getting shot of it any quicker by overpaying the same amount in regular chunks rather than a lump sum at the end of the fix. You're just throwing money away and reducing your optionality in the meantime.

[PeteinSQ]

That's not correct. Once you've paid off part of the mortgage today you no longer pay interest on that part of the principle, and that saved interest actually compounds. So you do actually benefit from paying incrementally rather than in annual or five year lumps.

[CarDoodle]

To put numbers to it:

£6,000 * 1.0153 * 1.0153 = £6185 saved if overpaid in to mortgage on day 1

£6,000 * 1.059 * 1.059 = £6,729 saved if put in a 2 year fixed product (ignores tax)

Difference = £544

If this is right then it is £544 better off using a savings account. Whether that is worth it vs hassle, admin or any other downside is up to OP

5.9% was from Vanquis Bank (lifted from moneyfactscompare - assumed interest compounds)

[NowWatchThisDrive]

PeteinSQ said:

That's not correct. Once you've paid off part of the mortgage today you no longer pay interest on that part of the principle, and that saved interest actually compounds. So you do actually benefit from paying incrementally rather than in annual or five year lumps.

When the rate you can earn on savings is no better than the mortgage rate, yes. But clearly that's not the case for the post I was replying to or the OP.

[richatnort]

Thanks all for the advice. Makes sense to put it in a savings then! We only have the mortgage as debt so I was thinking I could just get rid of it faster by over paying.

[rossub]

You will - pay it into the mortgage just before your current deal expires, along with the interest earned on it.