Help with mortgage payment strategy!

Abatement

I've just had my mortgage statement for last year, and am in a bit of a quandry about how best to approach paying off the mortgage over the next couple of years, while we're in the fortunate position of having a fair bit of disposable income. I'm particularly trying to get the balance down before I start to get clobbered on the interest rate from next year.

Facts:
- Mortgagor = Accord
- Balance = 298,000
- Term = 14.5 years (August 2027)
- Rate = 2.29% (variable) for another year, and then 3.49% (fixed) for three years. SVR of 5.99% (i think)
- Overpayment limit = 10% per calendar year (so about £30k this year)
- Cash savings = About £40k (some instant access, some on 90 days notice)

We're fortunate to have about a £4-5,000 surplus on our take home salary each month (after all expenses including mortgage, although we are thinking about kids soon-ish, which would reduce the amount slightly).

One option is just to overpay the 10% each year, but obviously that will limit how much I can bring down the balance.

An alternative would be to reduce the mortgage term (for a fee of £50) so that I'm paying higher monthly amounts. Is this a good/bad idea for any reason? And if I did it, would it be best to reduce the term first and then overpay my 10% for the year (so that the reduced term monthly payments are calculated on the higher balance)?

Or is there another strategy I'm missing entirely?

dimbo61

Can you really afford to overpay by £4/5000 every single month?
I would start by overpaying every spare penny for the next 7/8 moths and if you do get near the 10% overpayment limit then fill a couple of cash ISA,s earning more than 2.29%
You can use " Whatsthecost" to work out how much more it will cost each and every month if you reduce the term by 1/2/3/4 years

dimbo61

I reduced our mortgage term from 22 years down to 10 years BUT we had a large sum in the offset account in case we struggled for a couple of months.
This saved us over £50,000 in interest payments.
Now our mortgage went up by £500 a month which nearly doubled the cost of the mortgage every SINGLE MONTH so bear this in mind.
If you earn a very good income you normally have an expensive lifestyle