Overpay or save

FurryPaws

Hi,

Looking some advice from the more experience peeps on here..

I bought my first home last summer. Half my street are private owners but the ones down my end seem to be mainly housing exec.

I've had problems regarding very noisy neighbours from the house next door. This is another story but I'm trying to give an overall picture.

I will be fixing into a 5 year deal at 5.75% I have been offered by my current provider in the next week. There won't be any fees for this.

I can manage to save about £450-500 a month at the moment. At the end of the 5 year deal I will be looking to move into a semi-detached or similar in a better area. I didn't want to stretch myself with the first house and I know I will still be able to afford mortgage and cost of living should rates fly up to 15%... I think I've been sensible.

My question is - should I overpay on the mortgage with the money left over each month or should I be putting it in savings? Last few months I've been making up an emergency fund and filling my Cash ISA allowance..

The ISA savings rate is 2.9% so obviously it would make sense to batter down the mortgage though I'm thinking of saving the cash instead so I have a bigger deposit for next house rather than more equity? I know house prices have declined slightly since last summer so I don't want to make up the gap with what could be savings if you know what I mean.

Any advice appreciated.

FurryPaws

No opinions?

anselld

FurryPaws wrote: »

Hi,

savings rate is 2.9% so obviously it would make sense to batter down the mortgage

Think you answered your own question.

So long as you have an emergency fund it will be better at current rates to reduce 5.75% mortgage than to save.

Your next deposit = sale price - remaining mortgage + savings

... so that is not an issue.

adwat

Just the standard advice, I'm afraid, get about six months of expenditure in savings, then start overpaying the mortgage as much as you can, doing a budget will help you to decide how much you can afford to overpay per month.

FurryPaws

Thanks to you both for replying.. guess I did answer my own question, just needed a nudge to actually follow through

I think with spending so long saving for deposit and furniture etc I got used to seeing large amounts of money (to me) building up. I found it very satisfying. But I know ultimately I would save on interest and term of mortgage by OP.

Thankyou!

LilacPixie

Only other point I would make is see what your mortgage companies limit on OPs is. They seem to vary from a fied X amount per year to a fixed percentage of mortgage balance to a fixed percentage of monthly payment.