Should I overpay my mortgage?

Toast_Master

I bought my first home 6 months back and can now afford to overpay my mortgage by a few grand a year, probably. I've been thinking about doing this, because my monthly payments have hardly dented the mortgage so far. Is it work overpaying? Many people tell me I should save the money instead, but the rate of interest on my mortgage is greater than any savings account.

Any advice appreciated. Thanks!

morganb

I would definitely overpay by as much as you are able, as you will save more interest than you will make, and you could then reduce the term when it comes to renew in a few years time, thus saving more interest again. It's a win-win situation as far as I can see ...

BindiBahji

morganb wrote: »

I would definitely overpay by as much as you are able, as you will save more interest than you will make, and you could then reduce the term when it comes to renew in a few years time, thus saving more interest again. It's a win-win situation as far as I can see ...

I agree: you will save a lot of interest in the long run. The only downside with some mortgages is that you may not be able to get the overpayments back if you need the money at a later date. If that's important to you, check with your mortgage provider first.

Toast_Master

Thanks for the advice. I'm currently able to pay with no fee attached, so I think I'll try a sling a couple of grand at my mortgage while I can!

homer_j_3

I would balance it out - give yourself a rainy day fund for the peace of mind - when you have a couple of months salary sat in the bank - start chucking away towards mortgage. If you need your rainy day fund, you stop paying to mortgage and build it back up.

Ask your lender if you can borrow back or drawdown any overpayments made because if you can, you will not need the rainy day fund and you will make your money work harder against your mortgage.