Savings or mortgage overpayments?

cloud_dog

Assuming your mortgage provider calculates interest daily and all sums are allocated as 'capital' repayments grumbler is correct in that your monthly repayment figure is likely to only be recalcualed once a year (or if rates change).

The amount if interest you are paying on your loan will reflect the balance outstanding, i.. so if you do overpay then the overpayments will reduce your balance and therefore the interest you are paying. Although you will only see the change (monthly repayment) once a year of if the rates change - but you will benefit from overpayments.

SAP_Saver

Thus keeping in a savings account and making one yearly lump sum payment is better as I will have the interest from the savings also... I get ya'

grumbler

SAP_Saver wrote:

Thus keeping in a savings account and making one yearly lump sum payment is better as I will have the interest from the savings also...

... only if the net interest rate of the savings account is higher than your mortgage interest. Also be aware that many lenders restrict overpayments, usually by 10% p.a. of the mortgage amount. Usually this applies to discounted or fixed rate mortgages.