Mortgage v Savings

coletteflaherty

Looking at some of the threads on this site, I do count myself lucky that me and my bf have not got any significant bad debt that we have to worry about.

The only problem I have in life is that I can't afford to give up work at the moment to have children as we need both our salaries to pay the mortgage. Hopefully this will change in a couple of years time when things ease up a little, i.e. student loan paid off, and hopefully a couple of pay rises.

Whilst we already overpay by about £100, I can't decide whether to save any spare money I have (to live off while I'm out of work) or to overpay on the mortgage so that in a couple of years time, it's a little less coming out of my bf's overstretched pockets.

However, I've looked up on various calculators that the £100 I'm overpaying while on my current fixed rate (can overpay up to £500) is only going to reduce my mortgage by bout £10 a month once the fixed rate is up (if interest rates were to stay the same). Is it worth it?

Thefunkygibbons

I would say yes, as it is a good happy to use the pressure of mortgage overpayments to force you to keep a lid on spending, otherwise those payrises will just disappear into general spending

Remember that overpayment does not only reduce the mortgage, it also reduces risk as you reduce your exposure to interest rate rises

Nubs_2

I've just asked my mortgage provider to round up my mortgage premium so now we pay an extra £60. I know it doesn't sound like much but I can see it will help us budget better. What I don't have....
What do you think about these all-in-one accounts? I called my local branch and they have just sent me an illustration. It says we will pay off our mortgage 6 years earlier. What do you all think? I agree with TFGs (above) interest rates are up since last year so you are cancelling their effect.

Over payments do work!

tomstickland

Answer depends on how much you have saved for emergencies. General advice is that you should have a few months worth. After that overpaying mortgage is good idea.

jamesd

Nubs, the One Account is a great way to throw money away. It has a high interest rate compared to both offset and flexible mortgages. If you're going to be overpaying, better to go for a lower rate flexible mortgage.

If you want a different money pool for emergencies, an offset account is one approach, though you'll probably pay more in interest than for a flexible account and that could easily remove the benefit. I did a worked example here, showing that the Woolwich offset was more expensive than their lifetime flexible tracker if you had a 7,000 savings pool to offset. The higher interest rate on the One Account makes it more expensive than both.

The One Account is potentially great if you're in business had have a high proportion of your mortgage amount going into and out of the account every month.

liz.._4

our mortgage is coming down with the one account because of the stooze money I've put in there. Our interest payments are halved every month as the interest is calculated daily. Also I know exactly how much I owe and how much I am paying off the capital. Its made me more aware. There are cheaper rates out there for flexi type accounts but I like this account as it gives me freedom and flexibility to do what I want, also if I need emergency money its readily available.
My advice (for what its worth) is shop around...good luck!

louisjones30

Myself and my husband have no debts and are currently facing the dilemma of whether to put our disposable income into a savings account or to start to overpay our mortgage. We have always had a credit card and have worked really hard during the past 6 months to get rid of it, so we now have £400-£500 extra each month and we want to make sure we make the most of it. Should we maybe try and save half and put the rest towards overpaying the mortgage?

Am a newcomer to this chat forum thingy but have looked through some previous questions and you guys give some really good, sound advice. Would welcome your thoughts please.

Many thanks.