To overpay or Not to overpay

steve59_2

Hi i am after some advise, ive been overpaying on my mortgage for some time now,just received my statement, i owe 25000 at a rate of 1.49% tracker, ive got a full cash isa most saving rates pay more than my mortgage rate, my question is pay extra or find a good saving account, if i pay off early it will cost me 300 pounds, i have 8 yrs left, i hope this makes sense

Thanks

originalmiscellany

Hi there Steve - Easy one...
As you make more interest on your savings than you do on your mortgage, the purists would say to you save, until the reverse, (savings lower than mortgage) then clear it.

As a pragmatist, I'd clear the mortgage and then enjoy being mortgage free and continue to save as you have done.

But I don't think there's a terribly wrong answer here, it's just whether you can handle having a mortgage and savings in 2 pots or having less savings an no mortgage.

Either way, congratulations on being (potentially) mortgage free.

AdmiralX

steve59 wrote: »

Hi i am after some advise, ive been overpaying on my mortgage for some time now,just received my statement, i owe 25000 at a rate of 1.49% tracker, ive got a full cash isa most saving rates pay more than my mortgage rate, my question is pay extra or find a good saving account, if i pay off early it will cost me 300 pounds, i have 8 yrs left, i hope this makes sense

Thanks

Mortgage is not risk-free.
Savings depend also on your disposable which includes how low your mortgage is. Savings grow because mainly you put in each month, whereas interest adds a small amount.

Your repayments (tracker) depend on the BoE rate which will probably remain unchanged low 0.5% for the next 2 years at least - good for you. You might take the opportunity to repay as much as you want now that rates are low. Watch what signals the bank sends.

Sepa74

If your ISA is full for this year, then you will pay tax on any interest you earn from savings, so you need to get a savings rate that is high enough to allow for that.

Don't forget in April you can fill another ISA, so maybe save between now and then, fill the ISA in the months after April, and then after it's full, throw everything at the mortgage.