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Advice re overpayments or savings

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Evening all,

I currently have a mortgage of 57K (3 year discounted/flexible deal @ 4.94%), house value is approx 145k.

I have 6k in 2 ISA's and 4K in a 4.75% savings account.

I can make overpayments (as much as I like as long as it isn't redeemed in full) but would it be sensible to make such overpayments (as much as I am allowed) for the next 3 years or just keep making the standard DD payments and keep saving.

In 3-5 years time I also plan to be able to have enough equity in the house (approx. 125k) to be able to sell up, buy some land, do a self build and be completely MF or at least only have one for 15k to 20k-ish.

Any advice greatly appreciated.

PS - Have read the mortgage vs savings thread but would still appreciate some comments.

Thanks

Comments

  • humfer
    humfer Posts: 1,779 Forumite
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    Have a look at the mortgage amortisation table calculator below - its a US site but you can just substitute the dollars for pounds. Best one I have found and you can play around to see which would work for you. Personally I would keep you ISA's as they are and use any other spare cash to make overpayments

    http://www.loanbright.com/edirectlending/calc_amortization.html
  • save-a-lot
    save-a-lot Posts: 2,809 Forumite
    Combo Breaker First Post
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    Hi

    I would probably opt to pay the £4K off the mortgage as a lump sum simply because the interest rate on the mortgage is greater than the savings. Then, if you make regular/monthly savings to a savings account divert this into further overpayments on the mortgage.

    In summary
    £4K lump sum
    divert regular saving into mortgage as monthly overpayments aswell.

    Keep your ISA's as an emergency fund, then if you feel comfortable enough in a year or so's time overpay another lump sum from your ISA. How much are you earning from your ISA's???
  • Llyllyll
    Llyllyll Posts: 870 Forumite
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    It's a Halifax ISA - pays 5.00% AER/gross p.a.
  • save-a-lot
    save-a-lot Posts: 2,809 Forumite
    Combo Breaker First Post
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    Hi

    I reckon keep the ISA's, they are earning a smidgen more interest than investing the money into the mortgage debt, I always feel a little more comfortable with life when there is a few grand tucked away aswell. Besides, the high interest savings, you will be paying tax on the interest which will diminish it further, so definately pay this off the mortgage.
  • jamesd
    jamesd Posts: 26,103 Forumite
    Name Dropper First Post First Anniversary
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    You could consider moving the ISAs to get the 5.75% from Ruffler Bank.

    For the 4,000 you could start using the 12% before tax Alliance and Leicester regular saver account, which allows up to 250 a month deposited for a total of one year, then the account is closed. Or mix in the variable amount Lloyds TSB 8% before tax account.

    There are enough options there that you should be able to exceed your mortgage interest rate, which is equivalent to 6.175% before tax for basic rate tax or 8.23% for higher rate.
  • Llyllyll
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    Don't qualify for the A&L account as I'm already with them. Will have a look at the others though. Thanks.
  • humfer
    humfer Posts: 1,779 Forumite
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    Llyllyll wrote:
    Don't qualify for the A&L account as I'm already with them. Will have a look at the others though. Thanks.
    Try and go for the Lloyds account then as the 8% regular saver is fantastic as it last 2 years and you can get a much higher balance in their quicker - i.e. £750 in the first month as opposed to just £250
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