January overpayment Dilema ?

dave555

Hi

Not sure if this is a saving question as well, but
I have a Alliance leicester standard rate mortgage at 5.34% owing 22000 approx with 3.5 years to go.
Now January they allow a 10% one off overpayment so its about £2200
But i just managed to get a Halifax one year fixed rate instant access at 5.65% in december which is where my cashed in endowments/overpayment cash is hiding.
Dilema----Do i pay that and carry on with my allowed £500 overpay a month or hang fire and just save like mad for the year and pay the minimum and see what happens.

Just as an extra is it wise to remove my now bad rate isa cash in april and put that in the good rate halifax account. about 20K

Cheers in advanced

StuartGMC

Dave
The usual advice is to leave money in an ISA, transfer to different providers to improve on the rate, but once withdrawn you can't put it back. In your case you have about 6yrs worth in the ISA. Think very carefully before drawing it out and remember to allow for the tax you'll pay on interest earned on savings outside a tax-free wrapper.

Issues on saving vs OP will depend on your tax rate.

Are you allowed to OP at £500 per month plus the one-off 10% reduction each year?
With 3.5 yrs to go your scheduled reduction in capital owed will be £7k per annum, so the £500 per month OP will reduce this by a further £6k per year, then £2.2k on top you would clear well inside the 3yrs.