Best way to make the most from our savings?
Discussion
I am so confused! What would be the best way to maximise the potential from our savings? I am very apprehensive about putting all of this information up, so I'm hoping someone can help!
Some information...
Our current savings total is £34,000.
Our mortgage is a 25 year term, which we are 3 years in to. It was originally £129,000, and is now down to £119,000. It is currently fixed at 5.99% until just under 2 years time. We have been overpaying for the last year or so by £170 per month. We can overpay by 10% per annum, which I understand is a rolling 12 month time period. We do also need to consider putting more money into the mortgage after the fixed term ends, so that we can get the better rates.
We aren't using our ISA savings accounts at the moment.
We would ideally like relatively easy access to our money (since I am on pending redundancy in the NHS), but we don't need all of it, and if we're going to maximise our savings, we may not need as much accessible cash (e.g. We could lease a car instead of buying one).
So, what would be the best route? The most obvious is (for easy access), putting £10,200 in my other half's ISA, and the same in mine (over the next 2 financial years). These are 3% and 2% respectively with our current banks. We could then put the remaining £14,000 in my savings account, which is currently 1%.
So what would maximise the amount of money we could save from putting this in various places? I should've thought about this before now, but hopefully this could be a useful exercise.
Some information...
Our current savings total is £34,000.
Our mortgage is a 25 year term, which we are 3 years in to. It was originally £129,000, and is now down to £119,000. It is currently fixed at 5.99% until just under 2 years time. We have been overpaying for the last year or so by £170 per month. We can overpay by 10% per annum, which I understand is a rolling 12 month time period. We do also need to consider putting more money into the mortgage after the fixed term ends, so that we can get the better rates.
We aren't using our ISA savings accounts at the moment.
We would ideally like relatively easy access to our money (since I am on pending redundancy in the NHS), but we don't need all of it, and if we're going to maximise our savings, we may not need as much accessible cash (e.g. We could lease a car instead of buying one).
So, what would be the best route? The most obvious is (for easy access), putting £10,200 in my other half's ISA, and the same in mine (over the next 2 financial years). These are 3% and 2% respectively with our current banks. We could then put the remaining £14,000 in my savings account, which is currently 1%.
So what would maximise the amount of money we could save from putting this in various places? I should've thought about this before now, but hopefully this could be a useful exercise.
Cash ISA limit is £5,100 each - do that certainly. A stocks and shares ISA isn't as easy to withdraw from and puts capital at risk
Certainly overpaying your mortgage by the 10% allowed is no bad thing to do imo
In your position, I would tuck the rest in an instant access account and wait to evaluate things fully post redundancy
Trying to do everything at once in the face of changing circumstances isn't always the best thing to do
Certainly overpaying your mortgage by the 10% allowed is no bad thing to do imo
In your position, I would tuck the rest in an instant access account and wait to evaluate things fully post redundancy
Trying to do everything at once in the face of changing circumstances isn't always the best thing to do
It depends if this £34,000 was built up over a period of time or a one off earning - inheritance etc.
If the former and you are continuing to be able to save money every month, I would look to increase the overpayment amount on your mortgage as this will save you more in the long run.
With regards to your capital, bearing in mind your [potential] situation, I would look to put £20,400 away into your ISAs this year and next (look at moving them too). I would put £10,000 into an instant saver (3.05% Santander; 2.5% Egg etc) which you could use if you are made redundant.
The rest I would use to overpay the mortgage as a one off sum.
If the former and you are continuing to be able to save money every month, I would look to increase the overpayment amount on your mortgage as this will save you more in the long run.
With regards to your capital, bearing in mind your [potential] situation, I would look to put £20,400 away into your ISAs this year and next (look at moving them too). I would put £10,000 into an instant saver (3.05% Santander; 2.5% Egg etc) which you could use if you are made redundant.
The rest I would use to overpay the mortgage as a one off sum.
.. hopefully you are actively seeking new employment now? Hopefully you can time things right.
Are you expecting a redundancy payout?
If its decent, then it might be better to lump sum repay the mortgage as that will have a good effect on monthly outgoings. £170 pcm is nowhere near 10%, more like 2% or so.
Then use the redundancy payment to tide yourself over into a new job.
Either way I think lump sum repayment now is a good idea and then save the £170 pcm going forward until you know whats up. You will still have a chunk of savings but at 5.99% paying off the mortgage is worth saving that plus more like another 2.4% for a 40% tax payer.
No way will you get anywhere near that return anywhere, plus your repayments come down per month etc. When is the 12 month period up?
You might be able to catch it as it rolls over and pay twice...
Anyway, main thing is you have cash to tide you over the job change.
Id be looking now for new jobs to line one up, perhaps training or upskilling etc as well in my spare time.
Your best investment is yourself!
Are you expecting a redundancy payout?
If its decent, then it might be better to lump sum repay the mortgage as that will have a good effect on monthly outgoings. £170 pcm is nowhere near 10%, more like 2% or so.
Then use the redundancy payment to tide yourself over into a new job.
Either way I think lump sum repayment now is a good idea and then save the £170 pcm going forward until you know whats up. You will still have a chunk of savings but at 5.99% paying off the mortgage is worth saving that plus more like another 2.4% for a 40% tax payer.
No way will you get anywhere near that return anywhere, plus your repayments come down per month etc. When is the 12 month period up?
You might be able to catch it as it rolls over and pay twice...
Anyway, main thing is you have cash to tide you over the job change.
Id be looking now for new jobs to line one up, perhaps training or upskilling etc as well in my spare time.
Your best investment is yourself!
I'd suggest using your cash Isa allowance as definate. Paying off as much of your morgage up to the 10% overpayment limit as allowed.
Put a load into premium bonds, with interest rates low and inflation relatively high in comparison - you might get lucky...and they're easy to cash in if needed.
Put a load into premium bonds, with interest rates low and inflation relatively high in comparison - you might get lucky...and they're easy to cash in if needed.
10AE said:
It depends if this £34,000 was built up over a period of time or a one off earning - inheritance etc.
It's sort of a combination, though not inheritance - I sold my £17k car. I have built the rest up over the last 2 years. Some of this is obviously down to not paying the petrol, tax, insurance, etc on the old car though, too (over the last 6 months I've been without it).ringram said:
.. hopefully you are actively seeking new employment now? Hopefully you can time things right.
Are you expecting a redundancy payout?
If its decent, then it might be better to lump sum repay the mortgage as that will have a good effect on monthly outgoings. £170 pcm is nowhere near 10%, more like 2% or so.
Then use the redundancy payment to tide yourself over into a new job.
Either way I think lump sum repayment now is a good idea and then save the £170 pcm going forward until you know whats up. You will still have a chunk of savings but at 5.99% paying off the mortgage is worth saving that plus more like another 2.4% for a 40% tax payer.
No way will you get anywhere near that return anywhere, plus your repayments come down per month etc. When is the 12 month period up?
You might be able to catch it as it rolls over and pay twice...
Anyway, main thing is you have cash to tide you over the job change.
Id be looking now for new jobs to line one up, perhaps training or upskilling etc as well in my spare time.
Your best investment is yourself!
Yep, actively looking for a new job, though I'm not sure I'll be able to time it right with redundancy. Currently I'm not eligible for much of a payout. I'd get just over £4000 (obviously tax free), so it's not substantial (and certainly not enough to wait for in the risk that I can't find another job).Are you expecting a redundancy payout?
If its decent, then it might be better to lump sum repay the mortgage as that will have a good effect on monthly outgoings. £170 pcm is nowhere near 10%, more like 2% or so.
Then use the redundancy payment to tide yourself over into a new job.
Either way I think lump sum repayment now is a good idea and then save the £170 pcm going forward until you know whats up. You will still have a chunk of savings but at 5.99% paying off the mortgage is worth saving that plus more like another 2.4% for a 40% tax payer.
No way will you get anywhere near that return anywhere, plus your repayments come down per month etc. When is the 12 month period up?
You might be able to catch it as it rolls over and pay twice...
Anyway, main thing is you have cash to tide you over the job change.
Id be looking now for new jobs to line one up, perhaps training or upskilling etc as well in my spare time.
Your best investment is yourself!
The £170 a month has just been something we have comfortably without thinking been able to do, rather than trying to overpay by 10%.
Is there some way of calculating how much each year we save by putting money into the mortgage? As above, you mention 2.4% additional for the 40% tax payer. Is there a way I could work out how much we'd 'gain' each year by putting 10k in? (I'm a lower rate tax payer by the way, by far)
The 12 month period doesn't 'expire', so I've been told - it is a rolling amount, so it can't be over 10% within any 12 month period. We've been overpaying by £170 for about 2 years I think.
As you say, I do have enough cash behind me now to keep me living if I need to. That was one of the main reasons for selling my car, as it maximised how much we could save.
As a rough calculation (please tell me if this is wrong, or I have bad logic), by putting 10k into the mortgage, we'd save £600pa. By putting 10000 in each ISA, we'd save £300pa and £200pa at current rates. Would I be correct?
I have taken the first step, and opened a savings account with The Post Office @ 2.9% (the best currently on the market). I'm going to initially put the entire £34k in there, and then when I can, transfer £5100 into each ISA. I also need to contact the mortgage company to ask how much and when I can put money into the mortgage. I think putting £10k into the mortgage and no more at present would be sensible, since that leaves me with an easily accessible £24k in the worst case scenario.
Does that make sense, or have I missed something?
Does that make sense, or have I missed something?
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