What to do with spare money?

chubsta

I have a mortgage of just under 60k and a 'further advance' of just under 9k.

Both are on a rate of 2.5% with the same building society.

According to my online banking I can overpay up to £500 off each per month and reduce my term, but if I overpay more then interest is charged on the full overpayment.

I often have about 2-300 per month left over so am wondering what to do with it - should I add it to the larger mortgage to overpay more but be penalised on the full overpayment for that mortgage, stick it in an isa, put it in premium bonds or a savings account, or just blow it on treating myself?!?

Basically, my priority is to get rid of the mortgage as soon as possible and have no real interest in having loads of savings whilst I have debt, but at the same time don't want to pay the debt off at a quick rate if I am still going to be penalised for doing so!

Any advice gratefully received!

RosieTiger

I don't see any point in overpaying beyond the five hundred if your going to be penalised. As always, have a good talk with your lender and check out exactly what you can pay without penalties.
If it's the figure you said, then I would look at opening an ISA which should be capable of earning a higher rate of interest than your mortgage rate.
We follow the mortgage less savings route for measuring our latest position, for me that's exactly the same as lower mortgage provided the rate being achieved on savings is the same or better than the mortgage rate.
Whatever you do, use it wisely !

dimbo61

As you can get 3%+ from an ISA at tyhe moment perhaps you should be filling a cash ISA each first and then overpaying the mortgage or a bit of both!
If you work like mad and clear the mortgage in 4/5 years and then have £1000+ plus to invest each month you might be kicking yourself that you did not make full use of cash ISA allowances earlier and build up the full allowance £5340 ( I think ) each and every year