Saving or pay off mortgage

RedfordML

Just a question,

Once I have saved a lump sum, am I better paying my mortgage off or continue saving, as my savings are going towards my next house purchase and going to be used for a deposit (aim to save £12k next yr, 12% of my mortgage)

Do my repayments drop? My only worry is if house prices drop I would lose more money but have less debt on my mortgage!

What would the forum advise?

Meeper

If you can get a better savings rate than the rate of your mortgage, worth saving.

Other things to take into account would be how much access you need to the money, compensation limits of the savings accounts, and so on.

Yorkie1

It is generally recommended to have 3-6 months' worth of expenditure in savings as a rainy day fund before you start overpaying on the mortgage.

bhindi

Quote (It is generally recommended to have 3-6 months' worth of expenditure in savings as a rainy day fund before you start overpaying on the mortgage. )quote


I can get my overpayments back on my mortgage with ease, so I don't have any savings, as it's by far more practical to put every penny I can into the mortgage.

Thrugelmir

RedfordML wrote: »

My only worry is if house prices drop I would lose more money but have less debt on my mortgage!

Whether you repay the mortgage or not. A fall in house prices ends in the same outcome. A reduction in your net worth.

Depending on your mortgage interest rate, i.e. being higher than that you can earn on your savings. Then overpaying immediately would be the suggested route.

alexlyne

i paid a lump sum into my mortgage thinking I could take it back out again if necessary (future underpayments to the limit of any overpayments yadayada), to be told at a later date that it was actually a capital repayment that was made, and not an overpayment, and that I wouldn't be able to take it back again because it was against money laundering laws. Well annoyed at that!
So, if you do overpay, be careful and make sure you get the right information up front.

RenovationMan

As someone has already advised, make sure that you can get the money back easily and quickly. Often to get money back out you have to apply and the rate for the withdrawn money could be higher than the original mortgage, depending on your T's & C's.

I would always advise people to have at least 3 months worth of expenditure available in an instant access account and to be paying sufficient amounts into a pension plan before embarking on a mortgage overpayment regime.

As far as gains or losses on the price of your house is concerned, don't worry they won't affect your overpayments. When you bought your house, the mortgage amount was set. Regardless of whether house prices increase or reduce, the debt you owe is fixed. If you make overpayment then you reduce the debt.