£50 pcm. Save or overpay?

catoutthebag

Hi, I'm a FTB, I put 10% deposit on 90k property 1 year ago which is on a fixed 2 yr rate of I think (?) 3.39%..looking at my balance I think I've only paid 1k in equity so far. I've never made overpayments. I may consider moving to a more expensive place from my flat in a year, but not certain. Current mortgage payments are about 400pcm.

Due to a drop in car insurance, I have the potential of £50 a month spare.

I put £275 a month into private pension as self employed.

I have no debts or dependant

I have some cash savings

I'm enjoying a bachelor lifestyle.

So what to do with £600 a year?

I'm in early 30s.

1) increase PP to 325
2) pay £50 pcm into cash savings
3) overpay mortgage at £450 pcm

Please advice

Grenage

If your savings rate is lower than your mortgage rate, and you already have an emergency pot - overpay your mortgage.

Or spend it.

AnotherJoe

I have some cash savings
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If they are less than 6 months spending (suppose you were ill/unemployed for a while) bump those up, otherwise overpay mortgage, that is a high interest rate and the lower you can make the mortgage amount the better rate you'll likely get when it come to remortgage even though its not much of a dent in it, it may trip you over a threshold.

HappyMJ

catoutthebag wrote: »

Hi, I'm a FTB, I put 10% deposit on 90k property 1 year ago which is on a fixed 2 yr rate of I think (?) 3.39%..looking at my balance I think I've only paid 1k in equity so far. I've never made overpayments. I may consider moving to a more expensive place from my flat in a year, but not certain. Current mortgage payments are about 400pcm.

Due to a drop in car insurance, I have the potential of £50 a month spare.

I put £275 a month into private pension as self employed.

I have no debts or dependant

I have some cash savings

I'm enjoying a bachelor lifestyle.

So what to do with £600 a year?

I'm in early 30s.

1) increase PP to 325
2) pay £50 pcm into cash savings
3) overpay mortgage at £450 pcm

Please advice

If you can earn more than 3.39% in current accounts then save until you've maxed out every possible option.

Regular savers pay 6% interest so I would save there first before considering overpaying the mortgage.

Mortgage payments are always due even if you've overpaid in the past so it's better (in my opinion) to save in an interest earning account and if you hit hard times you can draw on those savings to make the minimum mortgage repayments.

Also as you're considering moving you'll need to pay fees from your cash savings....so I'd save.

I wouldn't save any more into the PP. If you had paid off your mortgage, maxed out all the regular savers and high interest current accounts then yes that's a plan but not just yet.

andrewmp

Check with your lender, some lenders allow you to use over-payments towards future payment holidays if required. That was you could build up a few months buffer while overpaying your mortgage.

Thrugelmir

If you are sort of person that finds that money gets frittered away. Then overpaying is for you. As the discipline is good and the fact that you are overpaying gets forgotten. One day in the future you'll be pleased you did so.

Dandytf

Thrugelmir wrote: »

If you are sort of person that finds that money gets frittered away. Then overpaying is for you. As the discipline is good and the fact that you are overpaying gets forgotten. One day in the future you'll be pleased you did so.

Exactly.

Which is why I've found making mtg overpayments much more simple and disciplined.