Should I pay more off my mortgages

rbfinland

Hello All

This is my first post, I am an ex-pat living in Finland, my mortgage is now 77,000 euros, and the interest has just gone up to 5.7%. We pay 510 euros a month for our mortgage.

My question is, is that I have 50 euro extra a month that I could save or I could put towards my mortgage payment each month, what would be the best thing to do?? is it a good time to add to my mortgage??

Many thanks

PasturesNew

Find out if any overpayments you make are deducted immediately from your mortgage. Some are not. Some are collected up and only deducted once a year.

So make sure you understand what yours does.

If your mortgage reduces immediately by the amount you are overpaying then you are better off paying off the mortgage because it is worth more to you than any interest you get on savings.

If you pay £100 off your mortgage at 5.7%, then you will benefit by not paying interest on £100, let's call that £5.70 for ease of maths.

If instead you put the £100 into savings at, say, 6%, then you'd gain £6 in interest on that, but you'd pay tax on that £6. At basic rate tax of 20% this could mean you'd lose £1.20 so you'd end up with £4.80.

So you'd be better off by £5.70 after a year by paying £100 off the mortgage, but only better off by £4.80 after a year if you had the cash in savings.

The maths was over simplified there. I hope it makes sense.

rbfinland

Yes thank you very much for all your help