overpaying mortgage

jules1213

We are allowed tp overpay our mortgage by £500 per month without penalty and our interest rate is currently 4.95%

We could continue, as we have done this past year, to keep the £5000 we want to use to overpay the mortgage in a savings account - but now the interest rates are so low I am thinking we will be better off overpaying the mortgage as much as possible now.

Would this result in us paying less interest each month in our mortgage repayments - and does it make sense to do this?

Cheers

Jules

Peelerfart

What about "Rainy day" money .Call me old fashioned but there is great comfort in having X,000 in the bank where you can get at it. If you pay £5K off your mortgage the money is usually spent.

It is nice to see the mortgage going down though.

whu

Yes it will and as your mortgage rate is higher than the savings rate you will get it makes sense to overpay as long as you have a bit of spare money for unforseen circumstances

jules1213

Yes - we still will have a bit put away for a rainy day and we will be hoping to move in 2010 - so it's not about paying the mortgage off early as we will be remortgaging then. Just to make the best of the £5000 we were going to pay off the mortgage at the end of the fixed term anyway.

I think it is something we should and will do.

Cheers J

Anon

It is a great idea to overpay where you are allowed to - if the limit is £500 it suggests you are perhaps with Nationwide? If this is the case, you could still have access to the full overpayment amount if you needed it. May sure that if you are overpaying to ask that it reduces the term rather than reducing your monthly payment (the latter is the default) as this will mean shortening the term of your mortgage and thus the interest paid overall.

Anon