Should we overpay monthly or lump sum?

BusyGirl

Hi
We have 11 years left on our repayment mortgage (fixed at 4.89% until April 2011) with an outstanding balance of about £52,000. DH is hoping to retire (early) in 2014 and use some of his lump sum to pay off the outstanding balance on the morgage.
The question is... do we overpay monthly from now, or save up that monthly amount instead and use the total saved along with the pension lump sum to pay off the mortgage? Which method would save us money?
Sorry if this seems like a daft question, but I would really value your expert views.:D
Thanks

BoGoF

If your mortgage interest is calculated daily then you're better to pay it as you have it, eg £250 per month overpaying from now would save you slightly more than paying £1000 in 4 months time if your interest is calculated daily.

I think I'm right in saying that most mortgages now work on daily interest but check your paperwork. Remember to check also for any potential early repayment charges. Many lenders will only allow you to overpay 10% a year whilst on the fixed rate.

Thrugelmir

Pay off as much as you can now on a monthly basis.

Mortgage interest is calculated daily and charged monthly, by the majority of lenders.

BusyGirl

I've checked my paperwork and it doesn't state if the interest is calculated daily or not. I think we will be overpaying about £280 per month until August 2014 so hopefully that will save us money and DH won't need to use all of his pension lump sum to pay it off. Thanks again:D

dimbo61

Check with your lender about overpayments first and then OP by every penny you have spare!
You dont want to live in poverty in old age so the more you clear now while OH is working the less is needed from the lump sum.

getmore4less

There may be a case for saving the money in ISAs now and using the Lump sum to pay off the outstanding mortgage.

This will depend a lot on the various rates, the size of the expected lump sum and surplus iincome now and n retirement.

What is the followon rate on your fix?