Save more or mortgage overpayment

halo1234

Hi Guys, I came off a fixed rate 2 year deal 3 months ago. With that my monthly mortgage payments dropped by £200 a month. Up till now I've just added that money to my savings. However my current LTV based on current value is at 83%. So should I really focus on getting this LTV number down? So I can get a better deal when interest rates go up? I'm not just thinking about putting that £200 as overpayment, but also some of my monthly savings also. Down side I guess is if I lose my job. However I currently have enough funds to last 8-9 months with my current expenditure.

What's your thoughts?

anselld

LTV is only relevant when you remortgage or move, so you can pay in the savings when that time comes if need be.
It depends more on your mortgage rate. Can you get more net interest (after tax) on savings than your mortgage rate?

Joe_Bloggs

@halo1234
You neglected to mention some key numbers.
1) Your present mortgage rate.
2) The rate you can get for your savings.

Rates are important! They can make you or break you !

3) What are the rates on your debts ?

I have no need to know but these numbers are key factors as to how and where to make the best of things.

I ride the rocky road at BofE + 2% for the mortgage. I can get 3 (in an ISA) to 3.5%(ISA tied up for another year) for my long term savings.


J_B.

dimbo61

When you have built up 6/9 months of income in cash ISA,s and have less than £16K in savings then overpay the mortgage big style.
Reason I say 6/9 months is because you are worried about your job
Reason only save upto £16K is nice benefits people!
Good luck

halo1234

Thanks for the replies.

I'm off my fixed deal & the current SVR is 2.50% which is higher than my everyday saver account, which I'm saving monthly into. Come March 2011 I will put this into an ISA. The rest of my savings are in 2 ISA's with 3 & 3.5%

So I guess I should keep saving this way unless I need to move house/remortgage & if it will have a positive affect on the mortgage rate I can get?

ref £16k does that include ISA's?

Thanks

halo1234

any thoughts on this? Also there must be some benefit to paying off more of your mortgage while the rate is low?

Thrugelmir

We are in an exceptional era where it is possible to earn more on savings than pay on a mortgage.

This scenario isn't going to last forever. So maximise the opportunity while you can.

In normal times there would no question that repaying the mortgage would be the answer.

alexlyne

I'm about to put a chunk of savings into repaying a bit of the mortgage.. The terms of my mortgage is that in the future I am able to underpay up to the limit of how much has been overpaid... so if if the sh#@ really hits, then I can stop paying the mortgage for a little while and in theory I won't be any worse off. (part of my mortgage is fixed at 6+%, so aiming to pay that bit off first... up to a 10% of the debt limit)

I would say that if you have cash stashed away for long term benefit, then having it in a mortgage (depending on the comparable rates) is better than savings... but I'm really no expert.