Q I have just sold my second home and plan to pay off some or all of the mortgage on my present home. I should be left with a sum in the region of £50,000 to invest. Can you advise on the best options to make this money work?
At the moment I am looking at two internet accounts but can't get my head around the difference between interest paid annually or monthly. My instinct tells me that a monthly payment is the better deal, particularly if I want to withdraw some of the capital. Am I correct?
TJM
A Your instinct is incorrect. There is basically no difference between monthly and annual interest and no difference when it comes to withdrawing capital.
That said, annual interest is normally at a higher rate because of compounding. Instead of paying out monthly the sum invested has twelve months of growth. But if you are able to get the same rate of interest for monthly payments, as you can for annual payments, then take it.
Many people prefer monthly income, even though the rate is normally lower, since it provides cash in hand, but that depends on your circ*mstances.
