Monthly Or Yearly Repayments Off Mortgage?

Nediachick

Hi,

I'm thinking of paying extra money off of my mortgage and wondered if anyone knew if it was better to pay a certain amount off every month or put that amount into a high interest account every month and then pay a bigger lump sum off after about a year?

Many thanks for any advice.

Libra1975

I think it depends on whether the mortgage you have recalculates the interest yearly or daily. Also on whether you are a higher tax payer etc for the high interest account.
Personally I would always overpay into the mortgage.

Nediachick

I think the interest is calculated yearly and the account would be an ISA, so no tax to pay.

Nediachick

Have just called Abbey and the interest is calculated daily.

MortgagesInc

All down to interest rates really then - as long as you can get a better rate on your money in an ISA than you're paying on your mortgage, and that the amount you want to save/overpay is below your ISA allowance, then I don't see any problem with doing that. You don't even necessarily have to pay the lump sum off after a year, you could keep paying in to the ISA and take advantage of a higher rate until you're ready to pay your mortgage off completely.

Nediachick

Thank you, much appreciated.

17Dave

Ensure there are no limits / penalties.
If you are on a deal for a certain term you may be restricted on how much you can overpay without incurring an early repayment charge.

Dan_Collins_2

Prob 10% per year and pay it off the mortgage just dont goover any limits. The account interest Vs Mortgage interest in my opinion is kak! What would you rather have and ISA or no mortgage??

dunstonh

It also depends on your tax status. A higher rate taxpayer would be best using the £7k ISA allowance as ISAs are a use it or lose it allowance and the long term benefit of building up a tax free pot can be more beneficial than paying off the mortgage a bit earlier. Especially if you can get a better return than the mortgage rate.