Should I overpay even more?

Moonflowers

I've currently got an offset mortgage with the Coventry which is linked to base rate and so it's on a fantastic 1.1% rate at the moment.

I've not reduced my monthly payments since the rate reduced and so I'm now overpaying by £200 a month. I've recently removed the majority of money from the offset side of the mortgage into a higher rate account.

I'm wondering if it's worth increasing my overpayments whilst the rate is low, so as to reduce the overall debt. Is this a good idea, or would it just be better to keep saving extra cash in another account.

Fyi, there are no charges for overpaying on my mortgage & it's extremely flexible.
Any advise would be appreciated.

Pee

What interest can you get in a higher rate account?

I would overpay as much as you can because we live in changeable times and interest rates might scoot up a lot in the not too distant future.

Moonflowers

"What interest can you get in a higher rate account?"

I've got a couple of accounts which pay a 3 to 4%, not fantastic I know, but the best I could find at the moment.

Pee

Well, how much money are we talking about and how much tax are you paying and after tax what is the difference? If you are talking about £50k, you will probably make money having it in another savings account, if it's £2k it won't be worth the effort.

Jacka87

Just to clarify your mortgage allows you to overpay as much as you like in any given year and you are getting a higher interest rate in the investment than you are paying to the mortgage.

If this is the case then invest any money you can. The investment will rise due to interest and you paying money in. At the point when the mortage rate rises and becomes equal to that of the investments you should then transfer all of the investments into the mortgage. This will mean you will have benifited by the difference in the rates.

However be careful remember to take off tax on the investments where required and also double check you can pay in as much as you like in any period and in a lump sum. If the mortgage is as flexible as you say then your onto a winner! If not then you could get caught out with loads of savings but a big mortgage with huge interest rates in the future!

PS this is similar to stozzing but the oposite of the way its meant to be done, rather interesting!

Moonflowers

I'm not talking about huge amounts of cash, just the extra from my salary. Most of my money is saved in an ISA account (a few years worth invested together).

As far as I'm aware, I can make overpayments and lump payments whenever I want but perhaps I will follow that up with them, just to make sure.

What is stozzing?

Jacka87

Stozzing is basically when people borrow money on 0% credit cards and invest the money. Thus earning money for nothing. You then pay back the money before the 0% period ends.

I thought it was like that in the sense its a bit backwards, vary rarely can you borrow money and invest at the same time and make a profit. Effectivly thats what you are talking about, you can pay back your borrowing or invest and if you choose to invest you will make the difference in the profits, interesting.

As I said in previous post, invest works if your mortgage is as flexible as you said , however you must also check that you can get the money out of your isa's quickly as you dont want a rate rise and then you are left waiting 3 months for acess to your money.

Link to stozzing from this site:
http://www.moneysavingexpert.com/cards/stooze-cash-credit-cards#simply