Overpaying mortgage?

Clairemcg

Hi, I currently have a post office mortgage with an interest rate of 5.9% and about £92000 left to pay on it. We are thinking of moving house in the next year or 2 and trying to decide whether to start overpaying my mortgage to increase the equity in my house or to just keep the extra money in our savings where we only get about 1% interest. Is it worth overpaying just now when we'll be moving soon? Any advice appreciated!

Twiggy_34

I guess it depends on how much you intend to overpay by. HSBC have a useful overpayments calculator which would help you calculate how much you would save in terms of interest and years off the term of the mortgage over any period of time you want to enter. I would suggest you go there to see how the interest saved on the mortgage would compare to the interest you would receive from placing the money in savings instead. Personally I would think you'd save more from making the overpayments but without knowing facts and figures that's a bit of an assumption...

ViolaLass

Twiggy_34 wrote: »

Personally I would think you'd save more from making the overpayments but without knowing facts and figures that's a bit of an assumption...

Given that the OP states the two interest rates, it's an easy judgement to make. Overpaying makes far more sense (provided there are no penalties for doing so).

ricky_v

If the debt rate is higher than the interest rate, overpay. If the debt rate is lower than the savings rate, keep the money in savings until the debt rate overtakes the savings rate, then chuck the whole lot into the mortgage (assuming there's no overpayment penaties).

Twiggy_34

ViolaLass wrote: »

Given that the OP states the two interest rates, it's an easy judgement to make. Overpaying makes far more sense (provided there are no penalties for doing so).

Fair point, sorry, half asleep still!