First Direct Mortgage - overpay monthly or save in a First Direct Regular Saver before overpayment?

puffintail

Hi all

First time getting a mortgage on my own and in need of help to work out some maths (far from my strength!)

I have the following mortgage that I am about to draw down (buying my first home on my own - hopefully completing early April)

First Direct - 5 year fixed @ 2.25% for £135,000
First Direct - 5 years fixed @ 2.49% for £9,000
TOTAL LENDING - £144,000 (90% LTV)

For context, I did an agreement in principle back in Jan 19 and booked £135k at 2.25% (by paying a £490 fee) but that property fell through. Since then I found another, but needed to offer more (hence requiring £9k more) but the 2.25% rate had gone, so that part is at 2.49%.

(I bank with First Direct BTW)

* My strategy is to focus over payment on my £9k mortgage for the 5 year fixed period (being the marginally higher interest rate) - I'll remortgage after that (either staying where I am or buying somewhere bigger)
* I can afford £100 per month in over payment.
* First Direct allow unlimited over payments (appreciating there are early repayment fees, which I wouldn't hit overpaying £100 for 5 years)

YOUR HELP
I have been thinking about whether I am better to open a First Direct Regular Saver, as this is 5% interest, and put the £100 p/m into that INSTEAD OF overpaying my mortgage. Some thoughts I've had;

1) By going the savings route, I must ALWAYS pay in at least £25 for the 12 months to maintain the 5% interest (whereas I could stop mortgage over payments altogether if I have a tricky month) - this doesn't feel like a big risk as £25 is achievable.
2) I understand that the interest on my mortgage is calculated daily, so if I overpaid each month to my mortgage instead of saving (and paying off at the end of the year) would there be any greater benefits?

Your thoughts are so welcome, my head is mash :rotfl:

getmore4less

Save at the higher rate.

if you think you might struggle for £25 any month keep £25 back in another account.

How good is you budget and emergency fund?

puffintail

getmore4less wrote: »

Save at the higher rate.

if you think you might struggle for £25 any month keep £25 back in another account.

How good is you budget and emergency fund?

Thanks getmore4less - I have money in Amazon shares which are quickly accessible and would be the emergency fund, I have written out a very detailed (and over-egged) budget, too.
The budget accounts for unnecessary things such as getting my nails done, piano lessons, meals out and more on food/household goods than I think I'll realistically need - things I could easily do without/cut back on.
It appears that I am still left with £128 per month after all of that (inclusive of the over payment and £100 per month assigned for a credit card payment - which actually hasn't any debt right now - to take into consideration unexpected costs.)

FIRSTTIMER

I am with FD and FD MTG. Ive avoided overpaying now. My home value has gone up around 20k over two years and my LTV has dropped from around 90 to 75. The rate I will move to is 1.6ish.

I had the same mentality as yourself, buy and then overpay. Since then, decided to keep payments as are and just invest in LISA/Pension/SIPP etc.