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	Issue 81 - February 2008 How do you make more money by saving less? Simple, clear down those expensive debts instead of putting your money into savings accounts that pay you a pittance and you could be quids in. However, as usual there are some provisos. Our simple guide suggests a few things you should be considering. Save Less To Make More It's a nice problem to have but we're often asked by people with surplus income whether they're best to watch their savings grow or use the surplus cash to repay their mortgage as quickly as possible. The simple answer is that, as interest rates are usually higher on borrowings than they are on savings, you should clear all borrowing before thinking about saving money. However, the real answer is not quite as simple as that because there are a number of factors that come into play which could affect your decision. An Emergency Fund The bit that worries most people is that once you've paid the money into the mortgage it's gone and you can't later withdraw it. Unless you have one of the flexible mortgages which allow you to overpay, take payment holidays and draw down lump sums then once you've paid the lump sum into the mortgage you can't get it back. For that reason it's usually sensible to make sure you have enough liquid cash to meet any emergencies before starting to repay the mortgage debt. Clear other more expensive debt first Whilst it's a nice idea to start making inroads into your mortgage as quickly as possible it doesn't make much sense if you have other more expensive debt outstanding. If you have personal loans, HP, or credit card debt it usually makes sense to clear those first. One of the few exceptions to that would be if you have credit card debt on which you are enjoying 0% borrowing. However, remember that the 0% will come to an end at some point and the debt will need clearing at that time in order to avoid hefty interest charges - that is unless you intend to arrange another 0% balance transfer. Check that you are able to repay your mortgage early? If you are currently on a fixed or discounted rate the chances are that your lender will impose an interest penalty on you if you repay the debt early. Make sure you check the terms and conditions attaching to your mortgage as it doesn't make sense to make lump sum payments if you are penalised for doing so. In this case you would be better off investing the money until the penalty period has expired. Time your mortgage over-payments to maximise the benefit Timing can be crucial in order to maximise the benefit. Lenders charge interest in different ways - some calculate interest daily, some monthly and others annually. If you pay a lump sum into the mortgage you will not benefit from the debt reduction until the next calculation period so if you mistime your repayment you could find yourself still paying interest on the old debt for a period of time. For example, if your lender calculates interest at the end of the year then you will pay interest on the debt at 31st December regardless of any repayments you make during the year - if this applies to your mortgage you should time your overpayments for just before the year end and leave the money invested and earning interest until then. Check with your lender how they charge interest and get your timing right. Continued.... Read More >>> Compare Mortgages >>> Speak to a Mortgage Adviser>>> Compare & Buy Car Insurance Banking & Saving Secured Loans Home Insurance Best Buys Travel Insurance 2 great reasons to review your live cover today. Go >>> Compare the market to find the best deal Go >>>     Compare 0% balance transfer cards plus many many more. 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