save or spend

confuseddad_2

Hi we have just fixed our 170k mortgage at 4.79 for 5 years. we have approx 20k saved so are we better paying this off the amount owed, subject to any penaltys incurred, or do we keep it earning misely interest in case of redundancy, un forseen circumstances?

It takes a long to amass any savings at the moment but will putting it into my mortgage really going to help.

Or do I drip feed it in with a percentage overpayment over a longer period.

benjo

There are some really clever folk around who will be able to calculate how much your money is worth in terms of savings vs mortgage overpayments - Im not one of them, but Im guessing they will need to know how (what rates) your money is invested before they can fully answer.

Personally, balance in all things is the way for me, I make overpayments and also make sure I save enough for the roof falling in, even though my small savings would be better spent on overpaying the mortgage we all still need an emergency fund - so certainly dont use it all to overpay.

getmore4less

Its a complex situation.

I think you need to do some more complete budgeting with medium, long term planning.


Do you have a good plan for month to month, year to year and don't have any suprises or unxepected expences. Any in that last 12months?

Are you saving for new white goods and cars that will need replacing over the next few years?

Any other big expences schools/uni fees looming?

What are the plans for loss of income, how long would you last, do you need to make it last longer by saving more?

long term plans to replace earned income?

With a good budget you would know in advance how much you could save overpay in the next 12 months, do you know this?

You also analyse what you get for your spends, got an expensive sky package or run an expensive car, how many years would it knock of the mortgage if you changed these for something cheaper.

Lifetime planning of income, spends, retirement is worth doing, things will change but at least you know if you are on track for now and where you would be if you lost income.

It may also show that you may have overcommited on you house, expecialy if you are not saving much, long term you need to save(not spend) a fair amount to replace earned income, does your plan do this?


Short term having no funds for lossof income could be a big problem so probably best to keep some cash readily available, ISA are a good place for this as long term if you don't need it you build up a pot of tax free savings.