Put money in savings or over pay on the mortgage?

[supersport]

I want to £6k short term over 12 months but it needs to be risk free as it is to pay off an interest free debt. So I have a choice put it in a crappy savings account or cash ISA at about 3% or I could use it to overpay on the mortgage which is charged at 2.5% and then draw it back out when I need it.

With inflation running pretty much 4% the savings account is going to loose money in reality. Clearly the debt I am going to pay off is also loosing value by the same amount, so I assume this will cancel each other out.

But what effect will this have on the mortgage? I suspect there is little in it for this some of money, but would be interested in the general case.

[Tino]

with a bit of work, the advantage account at lloyds might work for you:
http://www.lloydstsb.com/current_accounts/vantage_...
Standing order to put in and take back out a grand everymonth, should see you 4% Gross

[dave9]

mortgage co could charge you.

you could consider just an isa

[supersport]

Tino said:

with a bit of work, the advantage account at lloyds might work for you:
http://www.lloydstsb.com/current_accounts/vantage_...
Standing order to put in and take back out a grand everymonth, should see you 4% Gross

Didn't see that one.

Just spent a year doing that with Santander, 5% gross. Very nice thankyou.

[Welshbeef]

The thing is all the shopping round would if you had the full cash now for a year maybe save you £60-120 frankly a lot of effort/hassle when you could easily save that over a year food or clothes shopping.

For me if it's fee free dump into your mortgage provided you can take it back or if you cannot cash ISA

[Tino]

Welshbeef said:

The thing is all the shopping round would if you had the full cash now for a year maybe save you £60-120 frankly a lot of effort/hassle when you could easily save that over a year food or clothes shopping.

For me if it's fee free dump into your mortgage provided you can take it back or if you cannot cash ISA

You're probably right, not worth it for £60 or £70, unless your mortgage company charge you to pull the amount out again(legal, valuation etc etc)

[supersport]

The mortgage company don't charge for withdrawing the overpayment pot, which is nice.

In the past I have played the shopping round, spending on zero interest rate credit cards and putting the money into ISAs, had about £20K of credic card companies money invested at one point.

Worked rather nicely especially as we were renovating the house at the time. Sadly with interest rates being so utterly crap it is not worth it. Having said that the advantage is that I get a nice low mortgage rate.

[Beardy10]

Mortgage and keep the payments the same if you can, the extra payment will pay down the principal.....it'll help pay off your mortgage that little bit quicker.

It might not sound much but let's say you manage to pay off £500 of your mortgage by doing so. You won't have to pay interest on that £500 for the next 20 years (or however long your mortgage is).