Best to overpay?

dellen

Hope someone can help. I'm not sure how I work out whether over paying on my mortgage - vs leaving in other investments is worthwhile
I've got approx 89000 left on my mortgage. The interest rate is 3.49. I can overpay upto 10% of the outstanding balance per year - but I also have to pay a £60 fee on top to do so.

I currently have quite a bit of money dotted around (over 30k) and I am in a position to put between 14-15k per year into my savings from now on. Is it better to overpay the 10% plus £60 or just keep ploughing all my money into isas and pay my mortgage off in one go when my fixed rate is up (June 2017)?

lee111s

Personally I'd pay the 10%. Also find out when the "per year" refreshes. It's usually every 12 months from when you took the mortgage but some are Jan 1st. If it's the former and your anniversary is in March or April you could pay a fair chunk off your mortgage in a few months and then replenish your savings with the 10-15k a year you can now save.

Waldorf_Statler

If your savings are in cash ISAs then you'd struggle to get 3.5% on those which is the interest you are paying on your mortgage. So on that basis you should pay off the mortgage.

If you have stocks & shares ISAs (which generally you should have if your investment horizon is 10+ years) then there would be good cause to leave the money invested.

dellen

Thanks for the responses! No they are just in bog standard Isa's - I'm ridiculously risk averse. I think I'll overpay then!

amnblog

It's a matter for you but bear in mind that £60 is 20% of the annual interest saving when paying off 10% of your mortgage.


It sounds like waiting until there are no penalties might be smarter.

dellen

I called them and it's not going to cost me anything after all. Utterly bizarre. I can overpay and keep my monthly payments the same but they just won't officially change the term of my mortgage so I don't have to pay the fee.
If I insisted on it being reduced on paper I would have to go through "mortgage advice" apparently to check affordability. It seems a bit mad as I obviously can more than afford it hence me overpaying 10 percent - and the monthly payment would stay what I pay now. Mortgage lenders confuse me no end.