Overpay or save? How do you decide?!

bmunky7

I go for 6 months outgoings saved up regardless of the interest rates you can get, then any extra put in savings or off mortgage depending on rates you can get. In my case it's better to pay off mortgage, which I like anyway as once it's gone i wouldn't have to worry much if I lost my job / I'd have more freedom in my life.

amycool

We spent the first year saving after we bought our first house as we were left with nothing and neither of us had secure jobs at the time. I think it depends on your situation. If you're self-employed you might want a larger savings pot to fall back on, but if you're in a couple where you both have a steady salary the risk isn't so high.

It also depends on what rate you're getting, although I very much enjoy the satisfaction of overpaying the mortgage over saving it.

Perhaps put a percentage of what you have left at the end of the month into overpayments and a percentage into savings. That way it is satisfying every month and you're covering both bases.

Happier_Me

I think its about finding the balance that's right for you.

Up until recently we were overpaying our mortgage by more than £1,000 a month. We had around £18k in savings. We also have an offset mortgage so overpayments are normally accessible if you need them.

Around four months ago we made the decision to save instead because we are considering purchasing a buy to let.

If we don't invest then we will still be mortgage neutral by Christmas 2015.

ifihadalittlemoney

Thank you all for your replies. I think I may go with the idea of splitting half in to OPs and half into savings each month. At least then it will keep my mind at ease should anything crop up along the way.

getmore4less

if it is a choice between save or overpay(borrow less)

Offset mortgage - save and borrow less at the same time till you spend it again.

aggypanthus

edinburgher wrote: »

5% or thereabouts from N@tionwide and T5B. 4% or thereabouts from Clyd3sdale Bank. Wouldn't be able to get more than about £18k saved this way, we have £12-13k in cash. Tax to come off all of those rates, but still better than our 3.15% mortgage rate.

Investments are different obviously, but we've seen a decent enough uplift this year.

Sounds fair. I have a yr to go on mortgage, wish id overpaid before the shortfall built up.

You must have a big mortgage to live in Edin lol , isnt cheap!

Thrugelmir

amycool wrote: »

but if you're in a couple where you both have a steady salary the risk isn't so high.

There's far fewer well protected jobs for life these days. That includes the public sector which is starting to undergo radical surgery in order to reduce costs. So it's not just a question of risk. More the complete uncertainty of the unknown which is unquantifiable.

jamesd

I set a somewhat different objective. Financial independence. Initially I defined that as being able to live indefinitely in my minimal lifestyle without benefits. Took me about 8 years to get there. Part way through that I took out a smallish interest only mortgage that I'll eventually repay from a pension lump sum. I don't simply want a mortgage gone. I want to be sure I can meet all of my commitments.

One reason the pension works is that I have a need for both an income in retirement and clearing a mortgage. The pension tax relief helps me to provide both needs more efficiently. This is only suitable for those who reach age 55 before a mortgage has to be paid off and today the availability of interest only mortgages is more limited and a long term conventional mortgage might be the best deal available.

Today I could probably retire, though not yet with the degree of certainty that I want for being able to sustain my target retirement income.

sweetdaisy

I have an Offset Mortgage and usually take a 50/50 approach - 50% of extra money paid to the Mortgage and 50% put into Savings. However at the moment all spare money is being put into Savings as I need to increase the balance.

For me, I like to ensure that I have a good Emergency Fund in case of job losses/redundancy etc and then when I am happy with what I have in Savings I increase my mortgage overpayments. I have to admit though that I do like making mortgage overpayments, even if it is a small amount as it keeps me motivated seeing the mortgage balance reduce .