overpay or not?

dave76

Situation:
took out 150k repayment mortgage 11 months ago on 2yr tracker, BoE base rate - 0.12 % (so now at 4.38% I think). 25 year term. I think LTV at the time was about 83% ?

The mortgage allows up to £500 per month overpayments. You can take the overpayed money back out if you need the cash. I did make one overpayment early on but have not managed it since

I am a higher rate tax payer and have a little under 10k in an ISA (5.3% AER). I was keeping this as a rainy day fund in case I am out of work, but if I could overpay the mortgage yet still have access to the cash it might not be that important?



* Is my money better earning 5.3% in the ISA or using it to pay off £500 a month off the mortgage? (so theres about 20 overpayments in there right now). I guess I could also keep it in the isa and use some when the remortgage comes up next christmas?

* I am certainly going to try and overpay the 40ish that will be saved on my payments due to the last rate cut.

Dithering_Dad

The money is earning more interest in the ISA and you have a tax advantage with ISAs that you lose when you withdraw money out of them.

If I were you, I'd keep the emergency money in the ISAs and start to put all my remaining money onto the mortgage. I'd also look at reducing your outgoings by using uswitch to find the cheapest phone/utilities and checking out the MSE insurance section to make sure that you have adequate and inexpensive insurance in place. The more you reduce your outgoings, the more you have available to put onto your mortgage.

With house values falling you'll find that your LTV is increasing and you might find it more expensive to arrange your next mortgage with a higher LTV. Definately worth overpaying as much as you can afford, but not at the expense of the emergency savings you've already accrued.

dimbo61

Look for a better rate on your ISA as you can get at least 6.25 and even 6.7% with Natwest including bonus.
Start saving into ISA then overpay on mortgage
What a great rate pity its only got 13 months left ( going to be a big jump so start saving and overpaying then it wont hurt that much as you are used to paying a higher rate) GOOD LUCK

dave76

dimbo61 wrote: »

Look for a better rate on your ISA as you can get at least 6.25 and even 6.7% with Natwest including bonus.
Start saving into ISA then overpay on mortgage
What a great rate pity its only got 13 months left ( going to be a big jump so start saving and overpaying then it wont hurt that much as you are used to paying a higher rate) GOOD LUCK

I was thinking about moving ISA but I quite like the Bradford&Bingley one - I will have a look around though (I think the rate actually goes up to 5.65% when the investment goes over 10k so I should make sure that happens if nothing else).

So fill up the ISA first and then start on the overpayments seems to be the way to do things.

As far as the mortgage rate - maybe a 3 year tracker would have been the better option rather than the 2 but I am still glad I took a tracker when I did (I could only see rates coming down at that point). The way things are looking rates should be going down further over the next 12 months so coming off that deal hopefully wont be too bad, and there might be some fairly low fixed rates available by then (wishful thinking maybe )

Thanks!