Mortgage/ savings

pilipala_2

Hi

Please be gentle with me as it's my first time!

I have a mortgage of £95,000 at 4.99% with 23yrs left. I've got some spare cash left over at the end of each month about £200. I can overpay my mortage without any penalties and i've read on this board that if you can you should put it in your mortgage as its tax free.

say i put in the £200 every month for 5 years

200 * 12 *5 = £12,000

If after 5 years i took out £12,000 would the "interest" i'd earned still be in the "account" or would it have the same effect as if i had just put the money in a shoebox. ie i'd have £12,000 without any interest

I'm sure its easy to workout but my head hurts!

thanks

Xbigman

The actual situation is this.

If you put money in a savings acct. you can earn interest on it. 5% interest on savings means you pay tax, so you only actually earn 4%
If you make extra payments off your mortgage you pay less interest. In your case 4.99%. Because you have not actually recieved anything you pay no tax. You are better off in the long run.

So the extra payments do not earn interest, they mean you pay less interest.

From your post I assume you have a mortgage where you can over pay and then pull that money back out, yes? If you do then the answer to your question is; yes, the money you saved whilst you had the overpayments in your account is still saved after the overpayment is withdrawn.

Check the terms and conditions on your mortgage to make sure there are no penalties to withdrawing over payments.
Regards


X

mountainofdebt

I have always been told that you should have savings equivalent of 6 months salary.

I agree though if you can afford to overpay your mortgage do it!

grumbler

Xbigman wrote:

From your post I assume you have a mortgage where you can over pay and then pull that money back out, yes? ...Check the terms and conditions on your mortgage to make sure there are no penalties to withdrawing over payments.

I do not think that 4.99% mortgage allows easy withdrawing of overpayments.