2 questions related to mortgage overpayments

BaconandEggs

Hi everyone,

I've got two questions related to overpaying.

Number 1:
In the following article
http://www.guardian.co.uk/money/2011/aug/31/save-or-mortgage-overpayments
the answer to the question "should I overpay my mortgage" contains some savings rates that would be required based on the amount of tax you pay to make saving more worthwhile that overpaying. Surely those savings interest rates also need to factor in the interest paid on the mortgage? In other words, should you take those interest rates in the article and add on the mortgage interest rate when considering what savings interest rate would be needed to mean that saving is more worthwhile than overpaying?

Number 2:
A few months ago I saw a thread on here that linked to an article explaining that it would be better to overpay say £1 every forthnight compared to £2 every month. Unfortunately, I cannot find that thread or the article. Can anyone verify that this would be the case and also explain why it works like that? If that logic applies, would it be advantageous to take it further and split that 2 pounds over 30 days and pay daily?

BaconandEggs

Maybe this isn't on the right board?
May it should go in the mortgages section? - How do you alert a mod?

JonnyBravo

No 1.
In short you want the saving rate to be greater than the mortgage rate. You need to consider the saving rate after tax though.

No 2.
Depends how interest is calculated. If its daily (as many are nowadays) then the earlier you pay the better so paying the £2 on day 1 of the month is best of all but yes paying fortnightly is better than one payment at the month end.

BaconandEggs

Thanks - that makes sense.