Overpayment newbie! Do I pay off the capital or increase voluntary payment each month

LICAPICA

?

I have taken the decision today to try and be MF in five years.
To do this I will have to make large monthly overpayments (over £1000!:eek:) as opposed to lump sums here and there.

Should I be looking at paying that money off the capital of £85k by placing the money into the building society's account or should I be doing a voluntary payment alongside my usual payment by dd each month?

Will it make a difference either way?

Sorry if this question has been asked lots of times before but after a few hours reading through posts I am still non the wiser.

Thanks

Kaz2904

Hello!
The easy answer is that there is no easy answer- sorry!
You need to look at your terms and conditions and see if you are allowed to make unlimited overpayments (or even if your overpayments will keep you under the limit).
Then you need to look around and work out whether or not you can earn more interest on investing the money in savings accounts than by overpaying.
This is simple in terms of comparing your loan interest rate against savings interest rates and adding 20% for tax. (Or 40 if you are a higher rate tax payer).
Sorry that's about as clear as mud but it's dependant on interest rates generally!

LICAPICA

Thanks for that. Although shamefully I am still none the wiser

If it helps my interest rate is 5.99% and my repayment mortgage has the option of unlimited overpayments without fee or penalty for the life of the loan. I could pay the entire amount off tomorrow (I wish) without incurring any costs. I took this redemption free mortgage out specifically because we had other houses to sell and wanted to take it off the mortgage asap.
Interest is calculated daily.