Overpay or savings account?

Kalouh

Hello everyone,

After a bit of advice. We (partner and I) have just bought our 1st flat and already I'm thinking of how to overpay the mortgage!

Here's the stats:

Flat bought for: £140,000
Mortgage: £119,000
Mortgage rate: 4.39% fixed for 2 years

We can afford to overpay the mortgage by about £100 - £500 a month and the Nationwide mortgage we have allows us to overpay by up to £500 a month with no penalty. The problem is, is that this flat is only a 1 bed flat and it's our first step on the ladder. We hope to be able to move in 2 or 3 years time so the question is would it be better for us to overpay the mortgage to build to more equity in our property or should we put all this money in a savings account to build up a deposit for our next property?

Jock_Tight

My advice would be to build up a 6 months emergency fund first in an easy access account then start overpaying the mortgage.

Your mortgage interest rate is significantly higher than any savings rate available. Overpaying will save you the most money and improve your LTV.

alex_p

I think the general concensus is to build up a healthy safety net of savings - just in case - about 3-6 months income. The rest overpay. That's what I do.

Hopwe this helps.