Overpaying Mortgage VS Savings

Zero_Sum

adindas wrote: »

Well, see the OP original Post #1



Same with saving as long as you still have that money in saving earning that interest over the lifetime of mortgage, is the interest rate not compounding during that period ???

You will need to compare it at the same time span.

As long as you could still get the saving interest higher than the intetrest you would have saved in the the mortgage, you will always be better off with saving.

Yes but not at 5%
On normal savings, mortgage rates will generally be higher

adindas

Zero_Sum wrote: »

Yes but not at 5%
On normal savings, mortgage rates will generally be higher

Sorry but I fail to understand what are you taking about. If you want to compare it it is very simple really, no need a complicated calculation. You just need to see, how much interest rate you could get on your saving vs interest rate you pay on your mortgage. Which one is higher, it will become the winner.

In OP case is very straightt forward, as s/he is already paying very low interest rate at 1.85%. If the decision is purely on finacial, any saving paying interest rate of 1.85%+ will be the winner.

There are few instant access current accounts that pays 2%+ Interest. Not to mention if it is combined with dripfeeding it to a higher interest RSA to maximise impact such as Flexclusive RSA in Nationwide paying 5%, HSBC, M&S RSA.

Zero_Sum

adindas wrote: »

Sorry but I fail to understand what are you taking about. If you want to compare it it is very simple really, no need a complicated calculation. You just need to see, how much interest rate you could get on your saving vs interest rate you pay on your mortgage. Which one is higher, it will become the winner.

In OP case is very straightt forward, as s/he is already paying very low interest rate at 1.85%. If the decision is purely on finacial, any saving paying interest rate of 1.85%+ will be the winner.

There are few instant access current accounts that pays 2%+ Interest. Not to mention if it is combined with dripfeeding it to a higher interest RSA to maximise impact such as Flexclusive RSA in Nationwide paying 5%, HSBC, M&S RSA.

You only get the 5% for 1 year. So you save in that for a year, then chuck it all on mortgage afterwards.

adindas

Zero_Sum wrote: »

You only get the 5% for 1 year. So you save in that for a year, then chuck it all on mortgage afterwards.

I never said more than a year.

As I mention previously any saving, any instanst access current account paying 1.85%+ will be the winner if the decision is purely on financial. You do not even need 5% interest. Even you leave it in 2% current account untouch you will still be better off than overpaying a mortgage of 1.85% (because 2% > 1.85%). Getting 5% will be much better certainly.

Just in case people want to mximise impact, in 1 year 5% RSA has matured, put it back all the money in the current account paying 2%+ and the repeat the dripfeeding iteration to RSA. Is it not clear ??

Zero_Sum

adindas wrote: »

I never said more than a year.

As I mention previously any saving, any instanst access current account paying 1.85%+ will be the winner if the decision is purely on financial. You do not even need 5% interest. Even you leave it in 2% current account untouch you will still be better off than overpaying a mortgage of 1.85% (because 2% > 1.85%). Getting 5% will be much better certainly.

Just in case people want to mximise impact, in 1 year 5% RSA has matured, put it back all the money in the current account paying 2%+ and the repeat the dripfeeding iteration to RSA. Is it not clear ??

You did. You talked about getting 5% in year2
To get 2% savings you're looking at a 5 year fix wheras the mortgage is a 2 year fix. And if rates go up? Rates on current accounts are only limited to a couple of grand which would be maxed out with normal savings anyway

Its not as simple as you make out

adindas

Zero_Sum wrote: »

You did. You talked about getting 5% in year2

This is to match the OP calcualation. The fact that you keep saying 5% to beat 1.85% mortgage interest showing your little understanding this comparison. I have mentioned it a few times clearly that ANY saving / Current AC paying 1.85%+ interest will beat the benefit of overpaying mortage at 1.85%. No need for complicated calculation. Also what preventing people to put all of the maturing RSA in current AC paying 2%+ and restart the interation of RSA dripfeeding.

Zero_Sum wrote: »

To get 2% savings you're looking at a 5 year fix wheras the mortgage is a 2 year fix. And if rates go up? Rates on current accounts are only limited to a couple of grand which would be maxed out with normal savings anyway

Its not as simple as you make out

Really ?? what about 3x BOS current A/C 2%. 1x Clloyds @2%, 2xTesco AC @3%., 2X TSB@3%?? . The fact that this is an instant access that you could also use it for emergency cash will add the benefit of having saving/higher interest current AC over Mortgage.

If you still believe that overpaying 1.85% is better than saving paying 1.85%+, do what what you believe.

It is your money you area using anyway.

Zero_Sum

adindas wrote: »

This is to match the OP calcualtion. Also what preventing you to start the interation of RSA. Also I mention it clearly any saving / Current AC paying 1.85%+ intrest will beat the benefit of overpaying mortage at 1.85%



Really ?? what about 3x BOS current A/C %. 1X Clloyds @2%, 2XTesco AC @3%., 2X TSB@3%?? This is even instant access that you coud also use for emergany cash adding the benefit over Mortgage

If you stil believe that over paying 1.85% is better than do what what you believe. It is your miney you area using anyway.

You're including joint accounts in that. Plus Tesco is only for a year & needs 3 DD's each.

Im not saying overpaying is better, it entirely depends on circumstances.

YorkshireBoy

Zero_Sum wrote: »

Rates on current accounts are only limited to a couple of grand which would be maxed out with normal savings anyway

Many (most?) people in this country have hardly any savings. I believe I've read somewhere that the average balance for those with savings is slightly over £2,000.

For those who do have savings, the following is available in current accounts - all at 2% of better:

£20K at 2% with BoS & Lloyds
£7.5K at 3% with Tesco & TSB
£27.5K in total

For a couple the total is £61.5K

Forget those on these boards, many people can only dream of such savings balances!

So for a couple with a 1.87% APR mortgage, the only time repaying this over saving at an initial 5% and then transferring to a 2%+ current account is a smart move in financial terms is if doing so gets you a better LTV figure, and hence a cheaper rate mortgage.

YorkshireBoy

Zero_Sum wrote: »

Plus Tesco is only for a year & needs 3 DD's each.

Is it? Do you happen to know when they're going to let customers know this? As I understand it, the guaranteed rate lasts another year, not the interest rate payable. It may well stay at 3%.

But if such a time came, you'd overpay the mortgage with the savings.

Zero_Sum

YorkshireBoy wrote: »

Many (most?) people in this country have hardly any savings. I believe I've read somewhere that the average balance for those with savings is slightly over £2,000.

For those who do have savings, the following is available in current accounts - all at 2% of better:

£20K at 2% with BoS & Lloyds
£7.5K at 3% with Tesco & TSB
£27.5K in total

For a couple the total is £61.5K

Forget those on these boards, many people can only dream of such savings balances!

So for a couple with a 1.87% APR mortgage, the only time repaying this over saving at an initial 5% and then transferring to a 2%+ current account is a smart move in financial terms is if doing so gets you a better LTV figure, and hence a cheaper rate mortgage.

And where do all the DD's come from?
Ive got 8 split over 4 accounts to get benefits.
So im unable to open any more. And Tesco is only for a year (and 3 DD's)