Advice with paying lump some off mortgage or investing?

Claytop

Hi all... new to forums so be gentle

We have an outstanding mortgage balance of 83k and have the option to pay off 10% per calendar year. Have just rung them and we can pay 8.5k off the balance. This would bring our monthly payments down by £57 a month on the remaining 15.9 years.

My question is this... would the 8.5k be better off in a savings plan or better spent on clearing our mortgage quicker?

I know most savings plans are pretty awful at the moment so just seeing which options are best.

Many thanks

Heffi1

Would putting the money into savings give you an interest return of £57 each month, if not then I would pay it to the mortgage and free the money up and maybe save that instead.

Mirno

There are a couple of things to consider:
Firstly if you overpay you can't get at the money. Cash savings you can! If you've not got an emergency fund consider keeping some or all of this 8.5k back.

Secondly, unless the savings are an ISA it's taxed, so you can't just compare mortgage interest to savings interest.

If you're looking at real investing (stock market/managed funds) then you need to be aware that you will lose money in the short term, and may be in the medium to longer term too (although statistically probably not - in the long enough term).

Remember it doesn't have to be an all or nothing (which is something that a lot of people on here forget). You can pay off 3k and keep the rest in an ISA - giving you tax free savings as a safety net, and reducing your mortgage by ~£20 a month.

Finally you should also decide if when you overpay if you want to save on the monthly amount of your mortgage, or reduce the term.
You could be mortgage free earlier instead if that's what you want!

immoral_angeluk

Hi claytop, I've moved your thread to the mortgage free wannabe board where it should get more replies.