Should I Overpay My Mortgage???

maz7

I'm unsure what to do about my mortgage and could do with some straight help.
After changing my mortgage deal in 2007 to a lifetime tracker at +0.34% above base rate and subsequently seeing my mortgage payments drop I am considering overpaying. But should I when my rate is so low?
My outstanding repayment mortage is £31,000 with 12 years to go.
I can easily afford to overpay £100 or £150 per month. But would I just be better putting this money into a regular saver account earning 2.00% gross rather than overpaying? Then use the saved money later?
My rate is so low and I know it will rise in the future but unsure what is the best thing.
Went to my building society (no names) who just gave me a telephone number to ring their 'Mortgage Team' on - not even a sit down to talk!!
I would really appreciate any help from out there.
Thanks in advance.

chirpchirp

As your rate is so low you should save the money to pay it off as a lump sum. Begin by filling your ISA's and then have a look at regular savings accounts or Lloyds TSB vantage.

chirpchirp

Ooh look, another thread I've killed!

maz7

chirpchirp wrote: »

Ooh look, another thread I've killed!

Thank you for your reply. Did think it may be better to save it at 2%+ rather than the 0.84% (0.34% above base). Really like the thought of getting rid of my mortgage a few years early.
Lloyds TSB Vantage require my current account to be with them but Halifax have a regular saver account at 2%... but they also have a regular saver account for my children paying 6% allowing up to £100 per month to be paid in under their name (Doesn't quite seem fair, but could be done?). Mmmmmm....
Would it make more sense to save as much now and then pay lump sum when interest rates rise and save interest then?

chirpchirp

I hope it does, as that is my intention. However, it's normally advised not to let your savings rise above 16k incase you need to claim benefits at a later date. If you pay savings off your mortgage and you are over 16k before claiming benefits they may view it as disposal of assets.

getmore4less

Barclays regular saver at 3.25%?

Courgette

What's your bank's rule on OPing? Mine (Halifax) will only let me OP 10% annually, others allow £500 OP per month, others are different still. You could also look at reducing the term on your mortgage - I did this recently and by increasing my monthly payment by £300 (which is admittedly quite a lot but well within affordability) I knocked 14 years off the term. That might be something to consider

Jonbvn

It is would not be good MSE to OP such a low rate mortgage.

First fill up your cash ISA's.
https://forums.moneysavingexpert.com/discussion/401374

Second have a look for the best regular savings account. When these accounts mature, transfer the lump sums into your ISA's or the classic vantage accounts.
https://forums.moneysavingexpert.com/discussion/608697

Third, have a look at LTSB classic vantage account(s). You do not need to switch your current account. You just have to recycle 1k through the accounts each month. You can open up to 3 accounts paying 4% gross.
https://forums.moneysavingexpert.com/discussion/2195571

The above items are interchangable depending on the available rates.

I do not see the point of reducing the term on such a low rate mortgage, provided that there are no penalties for overpaying. You should monitor your savings rates vs. your mortgage to ensure your savings always offer a better return than your mortgage. In the future, should your mortgage rate exceed your savings rates, transfer the accumulated lump sums into the mortgage.

QED

bigblackdog

rather than over pay you should try and borrow more at the same rate , is there the facility to do this , a reserve? then whack all the extra cash somewhere to earn interest , wow i am so clever sometimes , you could be quids in having way more in savings and investments than the actual mortgage

maz7

Courgette wrote: »

What's your bank's rule on OPing? Mine (Halifax) will only let me OP 10% annually, others allow £500 OP per month, others are different still. You could also look at reducing the term on your mortgage - I did this recently and by increasing my monthly payment by £300 (which is admittedly quite a lot but well within affordability) I knocked 14 years off the term. That might be something to consider

The Nationwide will let me overpay £500 per month although I would consider overpaying between £100-£200 per month and looking to reduce the term of the mortgage.

So my thoughts were - My liftime tracker rate of base+0.34% is very good at the moment, so if I save the extra (£100-£200 per month) into a regular savings account and then when rates rise above what I am getting, overpay in monthly £500 chunks. Would that make sense?