Savings versus Mortgage?

Question

Would I be wise to use the money in my low interest savings account to pay a large chunk off my high interest mortgage?

Answer 1

not sure

Answer 2

As with any financial question "it depends". First, I would ALWAYS keep at least 2 months worth of living expenses in a safe place like a savings account. The interest earned will be lousy but at least the money will be there if you need it for an emergency. If you have plenty of cash in a savings account, then I would first max out your contributions to a tax deductible IRA before paying down your mortgage. If you have done that and also funded a well diversified account with stock and bond funds, then and only then would I consider paying down the mortgage.

If the interest rate on the mortgage is "high", then I would also look at refinancing now while the rates are still reasonable. Again, it all depends on the specific details but these are just some general observations.

Answer 3

Have you tried, refinancing for a lower rate. At http://www.justgetaloan.net we have been able to get people with all credit backgrounds great low rates and mortgage programs. Also paying down the mortgage will not change the high rate. On top of that if you have money saved it would be better for you to sind a sound investment vehicle like a mutual fund or something of that sort that will have a higher rate of return on the money than just a bank account. Feel free to contact directly at 866 530 7300 ect 7305 or by email at [e-mail]

Answer 4

Short answer: Yes, you would be wise to do that.

Longer answer: Compare the savings rate to the mortgage rate, and keep in mind that it's good to have cash around. For example:
Savings rate = 3%
Best Available Savings rate = 5%
Mortgage rate = 6.5%
Monthly expenses = 2000$
Bank account = 25,000$

Analysis: Note that your mortgage interest is tax deductible, which reduces the effective interest rate. But, you also pay taxes on the savings income. So you do make a higher interest rate by paying off your mortgage. The next question is by how much should you pay? The rule of thumb is to keep around 6 months of expenses, so I would recommend that you keep 12,000$ in your bank, and use the other 13,000$ to pay down your mortgage.

One excellent source for information on credit, interest rates, and personal finance that I have found helpful is Liz Pulliam Weston's articles on MSN Money (url below)

Answer 5

Depending on the amount of money in your savings, I would highly advise taking a look at investment property. Paying down your mortgage is good, but putting some of that money down on an investment property and having someone else pay that mortgage is great. Just be sure you leave enough in your savings to cover reserves for the investment property, as well as your own. Feel free to write me with any questions: [e-mail]

Answer 6

Contact your mortgage lender and ask them in you can make overpayments and if you can then take the money back out if you need to.

ASK THE LENDER EXACTLY HOW IT WORKS. Some won't let you take the overpayments back out.

For example Northern Rock allows you to pay any amount you want into your mortgage. Whilst that money is showing against your account you pay less interest on your mortgage. But then if you need / want the money back you can just ring up and get the money paid back. So in effect you would be using of mortgage like an offsetting account.

Answer 7

As long as doing so will not leave you broke, do it. Earning 2% and paying 8% rarely makes sense.

Make sure you have at least a few months of cash reserves for emergencies, then use the rest to pay down your debt.

I'm also assuming you have no high-interest credit card debt, which should be paid off before a tax-deductible mortgage is.

Answer 8

Keep some savings for emergencies but dump the mortgage as fast as you can.
Check out the link - this kind of account may work well for you.
One of the other answers suggests that mortgage interest is tax deductable - THIS IS NOT THE CASE IN BRITAIN, so if you are british that fine answer is no use to you at all.

Answer 9

YES YES YES!

Pay the bulk of it off you will save £££'s! Keep a small mortgage ongoing as this will make it easier for you to borrow more later, from your lender to move up the property ladder, extend or improve your house.

Have you thought of 'shopping around' for a better mortgage deal? Or shortening your remaining term? This will reduce the overall amount of interest you will pay in any case!

If you have managed to save then you should be able to pay a bigger mortgage! Move to a bigger property!

OR!!! For no risk have you considered investing some of your dough into premium bonds or income bonds???
For tax free prizes!

http://www.nsandi.com/

I make around £600 a year from mine which I pay into my mortgage account!

Check it out you could win BIG from your investment and wipe out your mortgage for good!

The advantage is that if you later fall on hard times you can get your money back without re-mortgaging!

Answer 10

There is only one answer to this question: YOU MUST PAY OFF YOUR MORTGAGE! In doing so you are effectively "investing" at 8% (I'm assuming there is no penalty for doing this). Ignore all the other advice, those people on the fence or those one or two (I'm sorry!) complete fools who told you to save at 2%. There simply isn't any other better financial option. You must pay off the high intrest debt instead of saving. Hope my clarity of thought helps.

Answer 11

the fast tale; As l see it your going to ought to shop your modern position until eventually the marketplace improves adequate that the promoting cost, at a minimum, receives you out of that loan and/or replaces what you took out of savings on your move. Renting is likely extra powerful then letting the position sit idle yet being a lengthy distance landlord opens up themes also. The condominium earnings ought to help with that loan charge yet there is not any make particular that you'll continually have a renter on the cost you want. l can't imagine any condominium association allowing you to shop 7 animals on community resources. Few landlords will take that inspite of a puppy deposit. A condominium may not be your proper decision. Your going to ought to make investments time into searching a clean position which will accommodate that many pets plus people. you may want the amenities of a condominium agent. a house aspects extra thoughts yet is it on your funds & does city enable such numbers of pets? you may attempt this. The question is do you want to? sturdy success.