Overpayment penalties. Pay them or hang on?

Gillybean

I'm almost at the limit of how much I can overpay this year without incurring any charges. My current tie in period ends in December.

The penalty for overpaying beyond the limit is 3%, so 30 quid for every grand. Mortgage stands at around 57k, at a rate of 3.29%

Between now and December I reckon I'll be able to raise a good 4k if not more. So would you overpay it as soon as it becomes available or hang on till December?

Lois_E

Hang on until December, but put the money somewhere you won't be tempted to use it for anything else, preferably where it can earn some interest, even if not much.

If you use the money to OP immediately, you will be paying 3% on it. If you wait until December you'll only be paying 3/4 of the year at 3.29%, which works out at less than 3%. And that doesn't even take into account the interest you can earn on your money while you're waiting. The interest earned will be pretty small, but still non-zero.

Gillybean

Thanks for confirming what I thought. It's only a matter of months and I can just bide my time till we come to remortgage.