What would you do?..

dendes

Hello, this is my 1st post, but I've been looking at these boards for a while.

I was just wondering if anyone could help me out with something please.

I have a mortgage of 118,500 fixed for 2 years @ 1.98%
I can pay up to 10% of the outstanding balance each year.
I have £20k savings in my current account.
Would you just pay the 10% off the mortgage now, as I have it? I take it my mortgage payments will go down slightly if I do.
Or would you leave the money in the bank earning a bit of interest as it's a 123 so I think that's 3%?

Many thanks in advance for any advice.

edinburgher

Remember that your current account is taxed, so it's just under 2.4% you get. Keeping the money saved makes you better off, but only by £50 or so a year.

You could pay off some of the mortgage to reduce payments, or you could reduce the term, which is what a lot of people on MFW seek to do.

What's important to you? Reducing your outgoings, or having it paid off sooner?

dendes

edinburgher wrote: »

Remember that your current account is taxed, so it's just under 2.4% you get. Keeping the money saved makes you better off, but only by £50 or so a year.

You could pay off some of the mortgage to reduce payments, or you could reduce the term, which is what a lot of people on MFW seek to do.

What's important to you? Reducing your outgoings, or having it paid off sooner?

Thanks for your reply.

That is the thing. The mortgage is over a 30 year term. So by paying off the maximum amount each year would slash that time.

So would you do the over payment now, or wait until near the end of the 1st year to do so?

Mrs_Rachel_Trelfa

It would be worth checking the terms and conditions. If your interest is calculated daily then it would be beneficial to do it sooner rather than later. If its recalculated at the end of the year then you would be better off keeping the money and earning interest and then pay it at the end just before the recalculation is due.

dendes

Mrs_Rachel_Trelfa wrote: »

It would be worth checking the terms and conditions. If your interest is calculated daily then it would be beneficial to do it sooner rather than later. If its recalculated at the end of the year then you would be better off keeping the money and earning interest and then pay it at the end just before the recalculation is due.

Thank you for your help

dendes

It was calculated daily, so I've just paid the maximum 10% off and it's just taken 4 years and 2 months off the term! I'll hopefully be able to do the same next year!