Bank savings

[jaydah]

Am asking for another.

As the bank interest is low is it worth putting towards my low mortgage - am employed. What would you recommend ?

[vindi48]

Difficult to see what the question is here jaydah. If the options are (a) placing funds in an interest earning savings account, or (b) paying principal off a mortgage - there are two things to consider.

1. If the interest earned after tax is less than the interest payable on the mortgage, then (b) is the answer. BUT
2. Check with the mortgage lender to ensure there is no penalty for early reductions. If there is, find out at what point such a penalty does not apply then put funds into a call-savings account and withdraw timely to reduce the mortgage.

I don't think being employed, or not, has any bearing on this decision. The only real decision is whether you may have immediate future need for the funds as once they are used for the mortgage they are gone.

[jaydah]

thanx vindi, would an employee have a tax concession for mortgage ? Reducing the mortgage would decrease a concession?

I am passing this info on as am thick here.

[twix123]

There is no tax relief given on mortgages anymore.

You do have another option if you have an 'offset' mortgage account, where the balance of your savings account is offset against the balance on your mortgage, and you only pay, or receive, interest on the difference. The beauty of this is that you won't be paying Income Tax on interest on any savings that have been utilised in this way.

[twix123]

I forgot...you would also still have access to your savings should you need them.

[jaydah]

thanx twix - will look into that