Want to be mortgage free - pls advise

Paisa1969

Hi there. We have an off-set mortgage of £49k with savings of approx £15-20k (amount varies but usually between these figures). Currently on tracker for life of mortgage at 0.54% above BoE Base Rate so we are at the moment paying 1.04%. Monthly repayment is approx £415 (we are on repayment mortgage) but we are paying £600 each month - overpaying to help reduce mortgage.

Are we doing the right thing by overpaying almost £200 per month? I keep thinking that if we pay, say, £10k towards capital then it may be better. I really am confused.

Can anyone help me understand what is the better option bearing in mind we do not get any interest paid on our savings as it is offset.

Really want to be mortgage free ASAP.

Any help would be greatly appreciated. Thanks.

Welshlassie

You are doing the right thuing. Continue to overpay as much as you can. You should keep some of your savings definately as rainy day savings recommended between 3-6-9 months of income. If you pay thatr £10k to the capital you wouldn't actually be any better off just that you would owe less and therefore not pay interest on it, but you are in that situation already and have access to the £10k for an emergency.

HTH

blueberrypie

You aren't being paid interest on the money in your offset savings, but you are saving interest that you'd otherwise be paying on your mortgage - that's how an offset works.

But given how low your mortgage interest rate is currently, you aren't benefiting much from it at the minute - so it would probably be better to put that extra bit each month into an account that would pay you more interest. Interest rates on savings accounts are also very low right now, but you can certainly find better rates than 1.04%. Choose an account that doesn't tie up your money, and if your mortgage interest rate rises so that it's higher than your savings interest rate, you can then switch the money from the savings account into the offset.

dimbo61

You and your OH should be opening a cash ISA each £3600 with Barclays straight away. ( tax free )
You should also open 2 regular savers again with Barclays paying 6% before tax £250 a month ( £3k each plus interest by the end of the year).
If your current account is with HSBC you can also open a 8% regular saver £250 each. GOOD LUCK

dimbo61

Barclays ISA paying 3.61% tax free.