Buying a car - use savings or use overpayment on mortgage?

Stma1202

Looking for advice on whether to drawdown £10,000 from overpayment on my mortgage account or take it from savings?
Mortgage is on variable rate (2.5%), whilst savings are attracting 6% (money is overseas, hence the good rate!)

Gentoo365

If the after tax income from the savings is less than the extra interest cost of the mortgage then it seems to make sense to drawdown from the mortgage.

As long as you regularly check the rates.

You are essentially borrowing 2.5% to earn 6% and there is still a margin there after tax.

Assuming the 6% is not taxed on repatriation, and is just as 'liquid' as the overpayment (i.e. you can access both easily, without penalty)


(and arguably if you can borrow more at 2.5% and 'invest' at 6% then you should do so, assuming the money is safe)

...oh and that there are no currency issues (i.e. savings and mortgage are in the same currency)

There is a slight risk that an overseas savings account could be subject to a 'bail in' if that country failed (see cyprus).