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  • FIRST POST
    • KCailey
    • By KCailey 5th Dec 17, 10:53 PM
    • 16Posts
    • 0Thanks
    KCailey
    Ye Olde Regular Saver vs Overpay Mortgage with a twist
    • #1
    • 5th Dec 17, 10:53 PM
    Ye Olde Regular Saver vs Overpay Mortgage with a twist 5th Dec 17 at 10:53 PM
    So my regular saver is coming to an end, £250 for 12months results in £3080.

    Then I got thinking.

    I have £200 000/20 years left on my mortgage, current interest rate is 1.5%.
    If I overpay £250pm, MSE's overpayment calculator says:Overpaying would save you £7,561 in interest alone, and mean you pay the debt off in full 4 years & 7 months earlier.

    Would It be better for me to overpay the mortgage £250pm for 15 years
    or
    Once a year do a lump sum overpayment of £3080 for 15 years?

    thank you
Page 1
    • kidmugsy
    • By kidmugsy 6th Dec 17, 12:53 AM
    • 9,899 Posts
    • 6,676 Thanks
    kidmugsy
    • #2
    • 6th Dec 17, 12:53 AM
    • #2
    • 6th Dec 17, 12:53 AM
    What was the AER on your regular saver?
    Free the dunston one next time too.
    • TCA
    • By TCA 6th Dec 17, 12:59 AM
    • 1,321 Posts
    • 760 Thanks
    TCA
    • #3
    • 6th Dec 17, 12:59 AM
    • #3
    • 6th Dec 17, 12:59 AM
    To answer that question you'd need to make some assumptions about what your mortgage interest rate and savings account interest rate would be over the next 15 years.
    • eddyinfreehold
    • By eddyinfreehold 6th Dec 17, 3:05 AM
    • 118 Posts
    • 88 Thanks
    eddyinfreehold
    • #4
    • 6th Dec 17, 3:05 AM
    • #4
    • 6th Dec 17, 3:05 AM
    If you calculate the interest you will pay on your mortgage over the full term then is is utterly depressing. For us it was a no brainer to overpay the mortgage as far as we could every month. We paid a 25 year term off in 11 years by eating away at the capital as fast as possible. Over that time it reaps more benefits than investing money as long as property prices remain stable.
    • PeacefulWaters
    • By PeacefulWaters 6th Dec 17, 6:42 AM
    • 7,308 Posts
    • 9,053 Thanks
    PeacefulWaters
    • #5
    • 6th Dec 17, 6:42 AM
    • #5
    • 6th Dec 17, 6:42 AM
    If the regular saver pays a higher rate than the mortgage charges you, the utilise the regular saver.

    If the lump sum on maturity can be saved somewhere at a higher rate than the mortgage do that. If not, pay off part of the mortgage.
    • KCailey
    • By KCailey 6th Dec 17, 9:01 AM
    • 16 Posts
    • 0 Thanks
    KCailey
    • #6
    • 6th Dec 17, 9:01 AM
    • #6
    • 6th Dec 17, 9:01 AM
    What was the AER on your regular saver?
    Originally posted by kidmugsy
    5%

    To answer that question you'd need to make some assumptions about what your mortgage interest rate and savings account interest rate would be over the next 15 years.
    Originally posted by TCA
    Yes, assume regular saver is 5% and mortgage is 1.5% for the next 15 years.
    • Cardinal-Red
    • By Cardinal-Red 6th Dec 17, 10:16 AM
    • 645 Posts
    • 145 Thanks
    Cardinal-Red
    • #7
    • 6th Dec 17, 10:16 AM
    • #7
    • 6th Dec 17, 10:16 AM
    5%



    Yes, assume regular saver is 5% and mortgage is 1.5% for the next 15 years.
    Originally posted by KCailey
    I'd be careful with this assumption!

    It really is down to personal choice. You need to bear in mind things like whether you are happy to commit the overpayment to the mortgage (once it's overpaid, it's "gone" and you can't withdraw it again in general) as compared to your regular saver which you can fall on should you boiler blow up etc.

    Also remember that a 5% regular saver only really delivers about 2.5% interest over the sum for the whole year. I personally still think 1% is worth it but you might find this changes the way you're looking at it.

    P.S. - What's the twist?
    Last edited by Cardinal-Red; 06-12-2017 at 10:20 AM.
    The above facts belong to everybody; the opinions belong to me; the distinction is yours to draw...
    • atush
    • By atush 6th Dec 17, 10:42 AM
    • 16,388 Posts
    • 10,142 Thanks
    atush
    • #8
    • 6th Dec 17, 10:42 AM
    • #8
    • 6th Dec 17, 10:42 AM
    try Ye Old Pension instead, pay your mtg off with the TFLS.

    Or Ye Old S&S isa. Pay off mtg when rates rise.
    • fiisch
    • By fiisch 6th Dec 17, 1:23 PM
    • 208 Posts
    • 89 Thanks
    fiisch
    • #9
    • 6th Dec 17, 1:23 PM
    • #9
    • 6th Dec 17, 1:23 PM
    Personally, I'd suggest to save in the regular saver (assuming you are actually saving rather than recycling the same £3000).


    If you have no use for the £3080, pay off a lump sum off the mortgage, and start your regular saver up again.


    Sort of what we do (less deductions from the lump for treats/holidays etc.)
    • Lokolo
    • By Lokolo 6th Dec 17, 1:25 PM
    • 19,858 Posts
    • 14,948 Thanks
    Lokolo
    You would gain more by saving in the regular saver and then overpaying with the matured amount, than by using the money to overpay the mortgage each month.

    You pay into the biggest AER % to get the most benefit.
    • YorkshireBoy
    • By YorkshireBoy 6th Dec 17, 1:39 PM
    • 29,619 Posts
    • 17,483 Thanks
    YorkshireBoy
    You would gain more by saving in the regular saver and then overpaying with the matured amount, than by using the money to overpay the mortgage each month.
    Originally posted by Lokolo
    Yes but...the maturity lump sum from the 5% regular saver could be put into current accounts paying 2-3% AER, providing two benefits:

    1. It's still making more than the mortgage is costing, and
    2. It's a useful buffer for emergencies.

    Obviously the time will come when withdrawing all these savings and reducing the mortgage balance might get you onto a better LTV tier when re-mortgaging. Do the sums at the time.
    • TheShape
    • By TheShape 6th Dec 17, 1:40 PM
    • 1,146 Posts
    • 920 Thanks
    TheShape
    If you calculate the interest you will pay on your mortgage over the full term then is is utterly depressing. For us it was a no brainer to overpay the mortgage as far as we could every month. We paid a 25 year term off in 11 years by eating away at the capital as fast as possible. Over that time it reaps more benefits than investing money as long as property prices remain stable.
    Originally posted by eddyinfreehold
    With interest rates as low as they are currently (OP is paying 1.5%) you're likely to make a far better return by investing the money. Plenty of current accounts and regular savers would also give a better return.
    • Eco Miser
    • By Eco Miser 7th Dec 17, 1:08 AM
    • 3,230 Posts
    • 2,989 Thanks
    Eco Miser
    Yes, assume regular saver is 5% and mortgage is 1.5% for the next 15 years.
    Originally posted by KCailey
    You don't need to make that assumption, just that those rates will hold for the length of the regular saver.
    Then do the calculations again when the RS pays out or the mortgage rate rises.
    Eco Miser
    Saving money for well over half a century
    • Eco Miser
    • By Eco Miser 7th Dec 17, 1:13 AM
    • 3,230 Posts
    • 2,989 Thanks
    Eco Miser
    Also remember that a 5% regular saver only really delivers about 2.5% interest over the sum for the whole year.
    Originally posted by Cardinal-Red
    But 5% pa on what has been saved at any point in time.

    Equally, overpaying the mortgage only cuts about 0.75% of the overpayment for the whole year.
    Eco Miser
    Saving money for well over half a century
    • katejo
    • By katejo 7th Dec 17, 12:33 PM
    • 2,995 Posts
    • 1,149 Thanks
    katejo
    So my regular saver is coming to an end, £250 for 12months results in £3080.

    Then I got thinking.

    I have £200 000/20 years left on my mortgage, current interest rate is 1.5%.
    If I overpay £250pm, MSE's overpayment calculator says:Overpaying would save you £7,561 in interest alone, and mean you pay the debt off in full 4 years & 7 months earlier.

    Would It be better for me to overpay the mortgage £250pm for 15 years
    or
    Once a year do a lump sum overpayment of £3080 for 15 years?

    thank you
    Originally posted by KCailey
    Check that your mortgage doesn't charge a penalty for paying more than a certain amount. Mine does but I can't remember the actual limit now without checking. I have been paying just under double the required amount for several years and that has no penalty. My interest rate in currently 0.77% Other money saved in regular savers goes to home improvements/maintenance.
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