Is over-payments the best option?

YoungGentry

Hey Fellow Savers,

Need a little bit of advice. I am in a position to do the full 10% overpayment on my SO flat in Croydon. This was always the plan, however I am not so sure if it is still the best option.

I have had the property for almost two years and hope to sell it and get a flat in more central location in three years.

It is 35% SO on a 210k one bed flat, ~50k mortgage left.

With Westfield on the horizon, the value of the property has already increased by 30-40k (based on neighbours selling).

What do you think?

Edit: Mortgage is a 4 year fixed rate @ 2.9. No rate of saving is higher than the cost the debt. Pensions is a pre tax deduction with my employer.

Kind Regards,

Gentry

[Deleted User]

If the mortgage rate is more than the savings rates, and there are no other considerations such as pensions, then maybe.

Nothing in your OP is relevant.

YoungGentry

Deleted_User wrote: »

If the mortgage rate is more than the savings rates, and there are no other considerations such as pensions, then maybe.

Nothing in your OP is relevant.

Thanks for your comment, hopefully my edit added the detail required.

If not, please advise.

Thrugelmir

Do you have an emergency savings pot? If so, then overpaying the mortgage is a good suggestion. As reduces the interest you'll pay and increases your equity. The amount of equity you have towards the next purchase may well help you obtain a better interest rate. Every little bit helps. Worth taking the long term view. Even if the initial return seems low.

YoungGentry

Thrugelmir wrote: »

Do you have an emergency savings pot? If so, then overpaying the mortgage is a good suggestion. As reduces the interest you'll pay and increases your equity. The amount of equity you have towards the next purchase may well help you obtain a better interest rate. Every little bit helps. Worth taking the long term view. Even if the initial return seems low.

Yes, equivalent to 6 six months of bills just in case. Thanks for comment, I will crunch the numbers to what the equity return will be in different scenarios.

Edit: So I crunched the numbers, the difference in equity profit is as follows, with vs without overpayment - Sell in 2019 4.6k, 2020 6.4k, 2021 8.6k.

These number beg the question if buying the other 65% actually provides the best option and the most flexibility.