Overypay or Save....that is the question.

Andrea75

Can anyone help me out with an ongoing dilemma....

I'm currently overpaying my mortgage every month and hope to be able to continue to do so this year. Overpayments will become smaller from 1st May with the Halifax interest rate increase...boo hoo!

I have approximately £300 which I put into savings each month but I'm toying with the idea of overpaying another £200 to boost my payments. Not sure what to do for the best. I like the security of having savings (even though the interest rate is naff) but I keep thinking that it's surely worth sacrificing my savings if it means I can contribute more to my mortgage payments and pay off sooner.

Why am I obsessed with being mortgage free? Am i alone on this one?

Thrugelmir

What interest rate are you paying?

Do you have accessible savings of 3 -6 months income?

Andrea75

Currently paying 3.5% for mortgage then 3.99% from 1 May. Savings is 1.5%

mungobella

I think that you need to think about your future plans quite a bit before you can figure out the balance between savings and overpayments. Do you have a few months expenses in savings? How stable is your job?--if it is in an industry that's making cuts, or you're a relatively recent hire, you may want to think about having more than a few months expenses in savings. Is it likely that you'll want to move in the next few years, or have a baby or another big expense? If so, it might make more sense to put the extra money in savings, where it is more liquid. On the other hand, if you don't think your life is going to be undergoing any big changes soon, and you like the security of paying off your mortgage, then that seems like a perfectly reasonable thing to do.

Either way, I think you need to look for a much better interest rate for your savings! You should be able to get 3% on an ISA pretty easily, and then the interest difference between your mortgage and savings wouldn't be quite so big.

Good luck! It sounds like you're doing well!

fred_davies

If you have the opportunity to retreive overpayments by keeping a nominal amount of money in your account (£1 in our case) then this means you can always withdraw this at a later stage.

The Nationwide allow overpayments up to £500pcm, which has meant we can dip back into that money should we ever need to, as long as the mortgage is still open. Paying the max amount drops the money they ask for each month, and you can change the term instead of this too.

As the previous poster said though, keep 3-6 months spare earning what you can in as high an interest account that you can, so you don't need to dip into the mortgage money.

Also depends on whether the feeling of 'no (little) mortgage' is better than having lots of 'savings you're not sure could be earning more elsewhere' all the time!