Overpay Vs Savings?

ReadingTim

Check the T&Cs relating to the repayments carefully - I was allowed to make overpayments up to a certain percentage (can't remember what, could have been 10%) during my fixed rate period, but that was limited to £500 per month. Therefore, a lump sum wouldn't have worked - you'd have to drip it in over a period of months.

I also ensured I made overpayments, not repayments, which would have allowed me to borrow the money back had I needed it, and shortened the term, rather than the monthly repayment to shift it as soon as I could.

Suggest you repay as much as you can per month and stick anything left over into as higher interest savings account as you can find. The alternative (if you can find it) is to find a savings account paying 2%+ and pay as much as you can into that for as long as you're in the fixed rate. Once that comes to an end and you move onto the SVR, make a lump sum payment from said savings account. Fix again, rinse and repeat!

TBagpuss

I personally do a mix - I have £250 a month going into the Nationwide saver which will pay 5%, but also overpay on my mortgage each month, and also put some money into my pension.

For me, my mortgage terms permit me to borrow back over payments either as cash, or through a payment holiday, should I need it, so they remain fairly accessible.

I'd suggest making he overpayments up to the amount allowed unless you do ind a savings account that pays at a higher rate, in which case, use that.

[Deleted User]

Unfortunately I have been using a nationwide 5% interest regular saver while saving for my deposit as well as a H2B ISA with Halifax at 3.5% so not sure where else would be good to save.

I believe my mortgage is that I can pay 10% of what we borrowed per year as overpayment - no maximum per month but I may be wrong - I will check.

Thanks

Penguin2017

Mate : Always overpay and pay off your loan earlier if you can. Its good you took a longer term than required as you can have some flexibility.

Why should you overpay... use the calculator find out really how much interest you saved.. and as banks load up the interest upfront, any payment in early stages is even more useful than latter half, and its just not the interest rate calculation

saajan_12

Spendingqueen wrote: »

So we are completing on 23rd but with my love of savings etc that is why I am here I want to know the best way to go forward.

1.84% mortgage 2 year fixed 10% overpayments allowed
So do I overpay as quick as possible - Will this mean that I pay less interest overall the quicker I pay or doesn't it matter whether I pay it on Day 1 or Day 600 of the mortgage. - most mortgages will have daily or atleast monthly calculated interest, so earlier overpayments will reduce the balance you pay interest on ie less total interest.

Or do I try and find a savings account paying 2% or more and how much would I need to have in savings for me to be better off saving like this? - For every £ surplus, if you can put it in a savings account paying over (net of tax if any) you'll benefit by (x% - 1.84%). If x% > 1.84% then you'll benefit by putting it in the savings account. But note
a) Savings accounts will rarely pay over 1.84% on large sums - once you hit the max amount that attracts the high interest, the rest will earn little/nothing so may be better saving elsewhere / overpaying.
b) Savings account will give you more flexibility - e.g. if an account pays 1.7% now but rates increase and next year pays 3%, you'll get the benefit of the increase. If you had overpaid mortgage, you're saving 1.84% interest both years regardless. If you need the money again,its much easier from an instant access savings account. In your mortgage the money is likely tied up for the fixed term, meaning you incur fees to draw down again or higher interest if you have to take a separate loan.

Would I then overpay as much as I can the day we go on to 3.99% rate as unlimited overpayments are allowed then? And should I stay on that rate and overpay or try lock in another rate with a fix again and hope they have unlimited overpayments? - After your fixed term, repay as much as you can/want and then remortgage for what you cannot afford (effectively making a lump sum overpayment). Then you'll be on a lower LTV so should get even better deals.
There was no option this time to get a good rate and have unlimited overpayments and be fixed.

Sorry for the questions it is just the first time I have owned property and I want to pay the mortgage off asap or at least that is the aim.- Don't apologies, its good you're thinking about this rather than sitting on savings that aren't generating interest, or indeed paying off too much leaving nothing for a rainy day!

Crucial point will be whether you can draw down on mortgage (ie re borrow your overpayments)
- If yes then no harm in overpaying unless a savigns account beats the interest rate
- If no then think about how much capital you need to be instant access. In emergencies you can lose much more than teh interest benefit from having to borrow / not affording essentials.

[Deleted User]

Hi, We do not want the overpayments back hence saving a reserve of money just in case of emergencies or anything.

Also just been looking at the help to save account and if you pay in £50 per month for 4 years you get a £1200 bonus so surely worth doing with surplus money isn't it?

Im sad that the mortgage has already gained so much interest and I cannot overpay until the first payment goes out, whenever that will be