John T
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I would say just leave it in the bank unless your falling behind on the mortgage or other bills,,,,, you never know when you may become un-employed and might have to rely on that...... you can always take some out and pay extra on the mortgage at a later time if need be....
As long as your able to pay your monthly payments, you can take part of it out and make an extra payment, but leave enough so you have something to fall back on in case of an emergency...... also the mortgage is tax deductable to my understanding......
As far as the APR going up, if it is possible.... try refinancing with a company that has a low fixed APR and no pre-payment penilties....... |
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Goonhilda
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Your savings will not be earning you much interest. However, if you put that money onto your homeloan, you'll save interest on that amount. If your interest rate is 7%, that $25000 would be saving you $1750 a year. That would be better performance than you would ever get by leaving it in the bank, because that frees up $1750 a year you can put towards paying off your mortgage, (getting rid of the debt burden sooner). On a homeloan of $150 000, putting the money in the loan is the same as cutting your interest rate by more than 1%, because of the amount you save over the long term.
It will put you in a better position to refinance because you will have more equity in the home, and even if you only put $20 000 and leave the other $5000 out as emergency savings, you would still be ahead.
In contrast, if you left that $25000 in a savings account, you would have to earn an interest rate 20% or more higher than your interest rate on the homeloan to cover the tax that you would have to pay on your earnings, just to come out even. So it's easier to put the money on the mortgage, and get a better return (you probably aren't able to claim the interest on the homeloan back on your tax, are you?) than it would be to find a safe investment product that would offer those kinds of fixed returns.
Put the money on your mortgage. If you have a redraw facility on the homeloan, you can access that money if you need it anyway. |
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Malc N
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Make sure that if you pay it off your mortgage you can get it back again if you need it. Its by far the most cost effective way of using the money.
It may be worth switching your mortgage to something like the One Account where you can offset it but always have access. |
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Al Zymer
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Having that amount of money in a bank account is a poor investment; there are better options. You could increase payments for your mortgage; thus reducing the amount you owe, as most of the repayments in early years only cover the annual interest. Invest most of the capital in a potentially more rewarding way, keeping some for easy access. You could choose an investment that pays income/dividends into your bank account, as you are now on lower pay. Always review your investments from time to time, to check that they are not under-performing. |
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Charcol Broker
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If you are about to change your mortgage have you though about taking out an Offset or Current Account mortgage?
Although you will not earn interest on your savings you will be reducing your mortgage payments and will still have access to your savings if you need the money in an emergency.
It will also depend if your savings are held in a standard building society or bank account or in a more tax advantagious form such as an ISA.
The rate at which the interest on your savings is taxed will also have an effect.
If you are receiving interest at say 3.8% Net and your mortgage is at 5.5% then offsetting the amount against your mortgage would be a much better use of your funds.
If you require further advice regarding mortgages please feel free to contact me. We do not charge any fee for our advice.
Matthew Trott - Charcol |
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Jo
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yes, but not all. You must keep some for 'a rainy day'. |
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Sarah M
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First things first, I would shop around for a new mortgage before the low interest finishes in Northern Rock. Get something lined up while you're still in a good position. You certainly shouldn't leave 25K sat in a bank account, but whether getting a lower mortgage is the right answer is a personal one. Depending on the size of the mortgage 25K may not make much of difference to your monthly payments ... it may make a lot! ... you need to sit down and do the calculations, and decide what impact it does have and whether that's a good use. Remember once you've paid the mortgage down you can't get that money back without remortgaging. Some things to think of: you should have ~6 months of salary available to you for emergencies, but you can have this in a high interest savings account. Worst case you forego the interest if you need to withdraw it. Typically (excepting the last few months!) the stock market will outperform your Mort. interest. You money is growing, but you can still get to it if needed. If it's still not obvious, suggest you meet with an independant financial advisor who can talk through and explain your options. It's worth the fee. |
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dan m
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If your only debt is the mortgage and your only savings the 25000, I'd likely not use all the cash to pay down the mortgage.
First, do some investigating as to what your options are when the mortgage term matures.
(1) What will Northern Rock be offering?
(2) Can you move the mortgage to another lender at a better rate?
(3) Can you extend the amortization at maturity to lower the monthly cost? Not the best long term solution, but worth looking at.
(4) Find out how much you will save every month for every 5000 you pay down on the mortgage.
With this information you will be in a better position to make a decision.
Never use all available cash to pay down debt ... always retain 3-6 months of living expenses in an emergency account. |
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Keata
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If it's a fixed rate mortage, it can't go up or down that's why it's fixed. Find out if another bank is buying the mortage. The rates are pretty low right now, it might be a good idea to look into refinancing with a more stable bank. |
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DEN GIRUS
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Put your savings into a high interest account @12% APY |
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Jeff
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Keep enough cash to cover 6-8 months' expenses.
Going into debt if you lose your job is a really bad idea.
The rest can go to the mortgage. |
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Kate!
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Yes, just leave some for any emergencies that might pop up. |
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...
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I dont think the northern rock rates will go up - they need to keep as many customers as they can to get a good sale price!
I would invest the money. Could you use it to do your house up then sell for another? People still see property as a good investment if you are in a good area. £15k would be a good budget for a renovation. Or you could use it as a down payment for a buy to let, get a mortgage with a different company and have someone else pay your mortgage! Watch out for Capital Gains Tax if you do this though! |
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junglejungle
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depends if you get any incentive for paying off a bulk sum of ya morgage, ya maybe better off putting it in a high interest account or a pep etc.
it's tricky as their are a lot of variables, your bank should advise you which is best for you..
mine can't match the share scheme I do, so utimalty the share scheme get my money. |
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Smart Investor®
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It would be wise to use your savings to INVEST and get high returns.
Try to invest in someones business. You may receive up to 20% guaranteed interest a year. You will not get such high guaranteed returns on stocks, mutual funds, bonds or CD's.
If you invest $25,000 at 20% annual interest rate, you will get back $30,000 in 1 year. It's possible! I run my own business and my net profit is over 5% a month.
Email me at investment4us@hotmail.com and I'll give you a valuable advice if you are serious about investing. Please don't forget to mention your question and screenname on Yahoo Answers.
Best of luck!
Smart Investor |
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Yoshi
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I think if you will be paying more in finance charges than you are earning in interest, pay off the mortgage. But keep a little in case you need some fast cash. |
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Lanham
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Apply maybe $20,000 to the mortgage thereby decreasing the interest paid over time and leave $5,000 in the bank as an emergency fund. That's what I would do anyway. |
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