Mortgage Vs Savings

PiKe

PiKe

PiKe

Caporegime
Joined
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I have a mortgage at 2.03% and a current account which will give me 5% on up to £2500 and a savings account which allows £250/month deposit, again at 5%.

Would it be worth saving up to the limit on the current account, then once that's done, deposit £250 into the saver and only then overpay whatevers left onto the mortgage?
 
Did you start a thread to ask whether 5 is greater than 2?

Whether the savings have utility to you is kind of down to you, your personal circumstances etc..

But we can answer that yes, 5 is indeed greater than 2.
 
dowie said:
Did you start a thread to ask whether 5 is greater than 2?

Whether the savings have utility to you is kind of down to you, your personal circumstances etc..

But we can answer that yes, 5 is indeed greater than 2.
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But do you have a mathematical proof of that?
 
Just had a further look into it and it looks like the difference between getting about £125 interest Vs saving £60 interest over the same period on the mortgage.

Unless that sounds dramatically wrong?
 
If your priority is to repay the mortgage as swiftly as possible then start overpaying the mortgage. There might be a marginal gain if you choose the saving option over the overpayment, but that route also brings significant temptation to spend part or all of the savings on something else other than the mortgage. Plus it keeps things simple.

In an age where most people can't be bothered to invest 20 minutes into researching cheaper utility suppliers, read a couple of meters and switch over (and that's the majority, and I'm not saying OP is one), just do what's most likely to bring about the result you want.
 
dowie said:
Did you start a thread to ask whether 5 is greater than 2?

Whether the savings have utility to you is kind of down to you, your personal circumstances etc..

But we can answer that yes, 5 is indeed greater than 2.
Click to expand...

Well 2% of most likely large mortgage will be more than 5% of small savings per month. So no it's not a silly question as you try to imply.

But as you say it does depend whether the OP might need access to savings.
 
muon said:
But wouldn't it have been funny if your reply had been along those lines (not that I personally would understand it).
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Ah, yeah fair point :)

bayo000 said:
Well 2% of most likely large mortgage will be more than 5% of small savings per month. So no it's not a silly question as you try to imply.
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What are you talking about?

He either reduces his 2% mortgage by X or he invests X in a savings account at 5%

as far as the money side of things is concerned it is that simple

The other factors are perhaps the things mention by the Abyss - like would he be tempted to spend the savings if he had easy access to it, that the amount saved is rather small and is he also checking his utility providers in a similar way etc..etc..
 
muon said:
But do you have a mathematical proof of that?
Click to expand...
The proof starts with the axiom that 1 > 0. Since it's an axiom, you don't need to prove that bit.

1 > 0
Multiply both sides by 3
3 > 0
Add 2 to both sides
5 > 2
QED

You're welcome :D

Edit: proof also relies on the axioms that 1 times any number is that number, 0 times any number is 0.
 
Jokester said:
You’re absolutely financially better off saving the money at 5% than paying debt off at 2%.
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This.

Having it in a savings account generally brings better flexibility. I'm not sure how much of a 'buffer' OP has but it's always good to have at least a few months worth of salary available immediately in case you lose your job or something breaks. This is something a mortgage will generally not allow for if you overpay
 
SlyReaper said:
The proof starts with the axiom that 1 > 0. Since it's an axiom, you don't need to prove that bit.

1 > 0
Multiply both sides by 3
3 > 0
Add 2 to both sides
5 > 2
QED

You're welcome :D

Edit: proof also relies on the axioms that 1 times any number is that number, 0 times any number is 0.
Click to expand...

Haha. Maybe not as quite as thorough as dowie might be. But I think we got the answer for the OP in the end.

To be honest I think the OP was just looking for confirmation of what they knew to be right, and it's not such an unusual question.
 
Reeve said:
This.

Having it in a savings account generally brings better flexibility. I'm not sure how much of a 'buffer' OP has but it's always good to have at least a few months worth of salary available immediately in case you lose your job or something breaks. This is something a mortgage will generally not allow for if you overpay
Click to expand...

+1
 
Agree with the above. Think about your safety net and rainy day fund first and foremost. Car breaksoen, boilers etc can be costly upfront expenses.

If relevant, then I'd be thinking about pensions especially if decent employer/matched contributions and paying off debt/loans/credit cards in order of highest interest.
 
The savings accounts are easy access but I literally only spend what I need to, this is why I'm hoping to be mortgage free in roughly 6 years if everything goes to plan (which it won't).
 
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