HSBC Mortgage

rob78

Hi,

I have an outstanding mortgage balance of £36,000 with HSBC. It has 11 years left but am fixed on a 3.5% fx for the next two years. After the two year I will pay the mortgage off in full (I will not face a penalty after the fixed period).

My question is, I now have the option of over paying 10% of the total mortgage ie. £3600 per year. With the fact that I am going to pay the mortgage off in two years time is this overpayment worth doing? I realise that if I was to overpay over the 11 years it would be worth it because I would finish the term earlier but the fact that I am going to settle the mortgage in two years anyway makes me wonder if it the correct thing to do?

I currently have the money in a 0.8% ISA.

Thanks in advance.

TrickyDicky101

Would you rather pay 3.5% on £3600 of borrowings offset by 0.8% income on £3600 of savings (net cost -2.7%) or just overpay now £3600 and save yourself that 2.7%?

It seems obvious to me you should pay off the over payment now (in one lump sum) and then the 2nd year overpayment as early as you can avoiding any ERC.

rob78

Thanks, I thought this was the correct thing to do, it was just the case that I will end the mortgage in 2 years that made me query if this would change things?

TrickyDicky101

Nope, doesn't change things. It does make your savings less than if you paid the mortgage off over the remaining 11 year term, but you still make savings nonetheless.