Save to repay or overpay now?

Amy56

Hi all:hello:

I've posted on this board before and even started a diary, as I'm currently regularly overpaying my mortgage by £70 a month through direct debit, but had also started to pay additional lump sums in when I could, as we want to clear the mortgage ASAP :T

But I've been questioning whether throwing everything straight at the mortgage is such a good idea?

I thought I was quite good with finances, but to be honest I'm getting my head in a spin over all the options - so I thought I'd seek your advice:)

Do you overpay your mortgage each month or do you save regularly, knowing you COULD repay your mortgage if you wanted to?

if overpaying makes the most sense, then i guess ill do that, I just was beginning to think that having the security of having access to the money if you needed/wanted to use it by saving it instead, might be the way to go?

As you can see, I'm struggling to work out what is the best thing to do.

I've heard mention of a good regular saver account through first direct but I see that you need their current account to have that. I'm reluctant to change current accounts as have had mine with Halifax for 20 years and love their online banking system, but it doesn't look like any of the halifax accounts are worthwhile in terms of savings rates

What do you suggest? (BTW - most of my mortgage is on 2.49%, with part at 2.79%, if that has any bearing on advice:))

Amy56

Have now found the Santander 123 current account at 3% gross (will have the £3k to gain this rate) but which also gives cashback for certain direct debits - has anyone got one of these?

I'm wondering whether I might be more beneficial putting my money in there until I get £20k (the max they pay interest on), rather than overpaying monthly to my mortgage?

Thrugelmir

3% gross is 2.4% net of basic rate tax.

Overpaying the mortgage is a good discipline. If for no other reason that the money cannot be wasted. Takes time to see results when overpaying. As mortgages are back loaded in terms of capital repayment. So rather like rolling a snowball over time the benefits will grow larger. As it's the compounding effect on the interest saved that will generate the return.

Albert Einstein “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

Amy56

Thrugelmir wrote: »

3% gross is 2.4% net of basic rate tax.

Overpaying the mortgage is a good discipline. If for no other reason that the money cannot be wasted. Takes time to see results when overpaying. As mortgages are back loaded in terms of capital repayment. So rather like rolling a snowball over time the benefits will grow larger. As it's the compounding effect on the interest saved that will generate the return.

Albert Einstein “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

Thanks ever so much for posting:). So I guess unless I find an interest rate much better than the interest being charged on my mortgage, (unlikely I know), then I'm better off paying off my mortgage.

That's good to know - just need to get used to the idea that 'once its gone - its gone', rather than building up the savings.:)