Overpay, capital repayment, savings?

Mikestu2012

Hi all, have just finalised a house purcahse (subject to completion) and already focussed on how to best tackle that damn mortgage. I have opted for a fully flexible tracker (BBR+2.3%, capital + interest, 25 years) with monthly repayments of £1450 and can afford to put £2500 per month to these repayments and further savings.

So obviously, while rates remain low I should be able to commit good funds towards overpayment, capital repayment or savings?

I'm a little unsure though as what are the best options for me. I'm leaning away from savings, as I don't think i could acheive a much better rate than my mortgage rate plus i have a good contingency fund set aside for unforseen circumstances, etc. So looking like capital repayment or overpayment. Any much more intelligent & experienced people out there with good advice for me?

Thrugelmir

Overpayments amount to capital repayments. By making overpayments on the mortgage then you have the flexibility of adjusting them as you wish.

What do you refer to as savings? As people have different interpretations.

Mikestu2012

Yes - good point. Well, as I said, I have contingency funds. So I guess I mean balanced medium- to long-term investments, some cash, some equities. Would hope to return slightly better than bank rates.

powerwin

I think the main thing you will need to factor in is a possible large increase in interest rates and how you will cope with that. My view is that it would be best to pay off as much of the mortgage as you can as quickly as possible, without jeopardising your ability to cope with a big future increase in interest rates, so you just need to balance those factors.

Equity investment has lots of risk so you really need to be an absolute expert to consider this for mortgage contingency, otherwise stick to safer options.

This is not professional advice ...

Rgds