Pay off mortgage or save

RACHAEL2

I am fortunately in the position to pay a little extra off our mortgage each month, (as we currently have a tracker mortgage)which i would love to do to get the mortgage paid off as quickly as poss and save lots of money, however my husband thinks we should save it, as we would like to move house in a few years time. He believes if we did save the money, we could put a larger deposit down so we can get a small mortgage when we move.
Which is best to do, pay of a little extra each month or save it towards a larger deposit.
Would appreciate any advice.
Many thanks.:)

flimsier

This is so going to be an "it depends" thread.

financialbliss

Hi RACHAEL2,

Not enough information provided to give an answer.

If your mortgage rate is low, then generally you're likely to get a better return from savings.

But, if you have a high mortgage interest rate, then you're much better off overpaying on the mortgage. The higher the mortgage rate, the more cost effective it is to overpay.

If you're only 2 years into a 25 year mortgage, then overpaying will cut months off the term. If you're in the last year of your mortgage, then you're not going to have much effect by overpaying.

Give your mortgage rate and we can start to give an informed reply.

Further mortgage information would also help, eg fixed or variable, term, any overpayment limitations etc.

Financial Bliss.

RACHAEL2

Hi, thanks for the response.
Is a tracker with no fixed term. We have 19yrs 6 mths remaining and currently pay 1.5% interest.(1% above base). Also if we were to move generally are these types of mortgages transferable to a new property so we could benefit from the low cost (providing rates don't rise too much)?

financialbliss

RACHAEL2 wrote: »

Is a tracker with no fixed term. We have 19yrs 6 mths remaining and currently pay 1.5% interest.(1% above base).

Rachel - You will be able to achieve a savings rate better than 1.5% - actually anything above 1.875% will pay out more interest that you would save in mortgage interest.

See this article:
http://www.moneysavingexpert.com/savings/savings-accounts-best-interest

for advice on a savings product. Can't comment on mortgage portability. You would have to speak to your lender.

So to original question - probably save, but you need to be on the ball with mortgage and savings rates and be prepared to switch / alter strategy after rate changes.

FB.