Early repayment?

mdj1

Hi All,

We took out our first mortage in April this year (£162k) and we can overpay 10% a year.

Our initial deal lasts for 2 years and I'm after a bit of repayment advice.

I'm in the fortunate position to be able to pay that 10% chunk of my mortgage for the next couple of years, the reason being is so that when the offer is up our LTV will be much, much better enabeling us to get a better deal / rate.

However, I'm wondering, if I save the money rather than pay it off the mortgage can I then pay off a large chunk when we renew the deal.

A bit like paying a deposit when originally buying. This way if something unforseable happens I will have a chunk of savings to call upon.

MF2015

Yes you can but you won't get the benifit of reducing the interest paid over the coming 2 years. It most likely won't earn what it would if you paid it of the mortgage but if you don't have a rainy day fund then only you can decide the best place for it.

How about paying say 5% off and leaving some in an ISA?

blueberrypie

It depends on what your current mortgage interest rate is. If you can earn higher interest (after tax) than your mortgage interest rate, it would be better to save, then use it to reduce the amount you remortgage for. If not, make the maximum overpayment on the mortgage as soon as possible. As MF2015 says, ensure you also have some available to you as an emergency fund.