Mortgage Overpayments

hufc2002

After being on a five year fixed mortgage, I have now moved to my lenders variable rate which is 1.99% above the base rate therefore 2.49%. My monthly payment has reduced by £220 so my question is what should I do with this £220? My mortgage provider is the mortgage works.

Should I overpay or perhaps put it to one side I.e. in an ISA?

Any views would be welcomed.

Thanks

Crashandburn

Difficult one as no one on here knows really understands how you operate as an individual or your circumstances.

Firstly make sure you do have some savings behind you already ie an emergency fund (3 times net income)

Once this is done, are you then the sort that keeps dipping into savings now and again and doesn't really build them up? If so, then an overpayment into an account you can't reclaim may be better.

Very little in ISA savings rates vs the rate you have so its possibly more about how you manage your own finances.



/Ouch! This fence has got a lot of splinters on it!

hufc2002

When you say 3 times net income do you mean 3 times annual salary?

I currently have approx £14k in ISAs.

lee111s

No, 3 times your monthly net income.

Depends what rate your ISA is, if you can pay into an ISA over 2.49% then I think you'd be better to save the money. Or you could simply do half and half, totally up to you

hufc2002

I managed to be successful in applying for the LBS ISA before it was removed which is paying 2.55%. I plan to transfer my 2012/13 ISA of£2500 into this.

Should I then add the additional £220 into this ISA on a monthly basis and will this also eat into my 2013/14 ISA allowance with it being new money?

dimbo61

ISA rates are not very good at the momennt so once you have saved £16K in cash ISA,s ( Think benefits) I would then overpay the mortgage each month.
Now by overpaying the mortgage you build up equity in the property and clear some of your debt!!!
Should you wish to move to a bigger house in the future you have a bigger deposit.
Some lenders allow you to have a " Mortgage holiday" if you are several months ahead in your payments