MegaSack DRAW - This year's winner is user - rgwb
We will be in touch
I've just finished a self build. We were given a mortgage max of 101,000 to be given in stages. We only needed 85,000 to build the house, and we don't need the rest for anything in particular although splurging on a new car is tempting.
So...
Should I
A) Leave the money where it is and have smaller mortgage payments
B) Put 15000 into NSI RPI +1% bonds for 3 years
Mortgage is 4.9% fixed for 5 years and NSI bonds currently pay 6.3%.
B seems a good idea to me but is there a catch? (Apart from inflation dropping drastically but all the forecasts Ive looked at suggest it should stay up for the next year or so at least)
Bear in mind you'll have to pay tax on the interest so you won't net 6.3%. Could end up being more like 4.5%.
The ability to borrow at a lower interest rate than savings interest rates is effectively arbitrage and so therefore cannot exist.
welcome to the world of arbitrage.
B sounds fine, but it does leave you open to inflationary risk. Now, I do agree that we are in for higher inflation over the next few years, but thats your risk.
This is where offsets work really well, because you can give yourself, say, a £110k facility, draw £85k, and then have the balance available if you need it for something later with no additional fees or margins.
bm - Im currently doing my own self build, would love to see some pics of yours...
the interest on the bonds is tax free
bm - check the amount you can invest tax free. there's a limit IIRC.
The ability to borrow at a lower interest rate than savings interest rates is effectively arbitrage and so therefore cannot exist.
Our current mortgage with the Nationwide .75% above base is at a lower rate than they are paying us on our ISA. 😀
We could actually pay it off but we'd be loosing money!
OK NSI is tax free. But not sure I get where you got 6.3% from. Isn't RPI something like 3% currently?
Stoner, must get some pics of the house online now that it is almost all done, the most recent one I have on my facebook is not far off a year old 😳
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Nothing ground breaking, timber kit, 155m2, storey and a half with some nice features though to make it stand out a wee bit from the identikit developer ones round about us. Been in 7 weeks now and loving it after spending 15 months in a caravan.
Much more importantly, this is the shed going up 🙂
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hmmm , do pics linked from fb not work on here?
[url= http://www.statistics.gov.uk/cci/nugget.asp?id=19 ]this makes my head hurt but I think it says RPI is 5.3% at the latest calculation??[/url]