should I overpay to clear endowement?

DMAN63

Hi
I am 53 and I currently have a mortgage with £80k left to pay. 35k of this is interest only.
Current interest rate 1.6%. I have 13 years left to pay.
Endowment has payed £21 k only due to shortfall.Some of this we have spent on home improvement and some I would like to retain to help children with deposits for their own homes.
However I am concerned about paying the 35k interest only element.
I have spoken to my lender and they say if i overpay by £200 per month this will clear the entire interest only element by the end of the term.
This is quite a chunk of money to find every month and I am wondering if I would be better investing the £200 pm in a high interest account instead? (if their is such a thing at present!)
My thinking is that if I can get say 3% surely this is going to give me a better return and I can then access the money in an emergency, Any thoughts much appreciated.

Voyager2002

Your thinking is spot-on. The amount of your overpayments gives you a tax-free return of 1.6 per cent, since that is the amount of interest that it saves you. So an account such as the TSB Classic or Nationwide Flex Direct, paying (taxable) interest at a rate of 5 per cent, would give you a far greater benefit.

Thrugelmir

If you can find a savings account that pays more than mortgage interest rate then deposit the money there.

While it's good that you wish to aid your children. Your priority should be to secure your own future first.

AnotherJoe

DMAN63 wrote: »

This is quite a chunk of money to find every month and I am wondering if I would be better investing the £200 pm in a high interest account instead? (if their is such a thing at present!)
My thinking is that if I can get say 3% surely this is going to give me a better return and I can then access the money in an emergency, Any thoughts much appreciated.

As long as it is only for an "emergency" and doesn't get whittled away by day to day stuff that you rationalise is emergency-ish, then yes thats a good plan.

elmer

Why don't you pay whats left of the £21 000 into your mortgage? Then you won't have an unaffordable £200 per month to find for the next 13 years?

Then you can see if you can afford to save some money for your children, they can't really be expecting a big deposit out of a share of £21000

elmer