Pay off HTB or overpay mortgage

jp1233

Hi all,

I'm a first time buyer and have just moved in and started to pay the mortgage. We have approx 55k HTB and a mortgage paying approx 920 per month. We can 'comfortably' afford to pay at least an extra 500 each month into the mortgage as overpayment, however what would be the best option?
1 - Over pay the mortgage monthly and use that equity in the house when we remortgage after 2 years to pay off some/all of the HTB loan
2 - Put it into savings and pay off some/all the HTB in a couple of years when it comes to remortgage.

Thanks in advance

rrcollins92

I'd choose the second option, pay off the HTB before the interest kicks in on it. (This is what I plan to do)

AnotherJoe

What is the rate on the HTB ?
My instinct would be HTB unless you can save at a higher rate in a regular saver in which case if it's the usual sort, one year term, save for a year, pay a chunk off, start a new one, rinse and repeat.

getmore4less

Have your read the terms of payment on the HTB?

You can't just pay bits off.

If you can afford that much more why are you using HTB?

jp1233

Thanks for all your responses,

First 5 years are interest free, with a management fee of £1 per month, so negligible. After that it gets big interest so needs to be paid off by no later than the 5 year point.
Sorry if it wasn't made clear, the money wouldn't be going into monthly payments onto HTB, you can either pay half of it, or all of it in one go. The question was more aimed, should i put £500 into savings each month, then when it reaches enough, pay off HTB. Or pay extra into my mortgage each month, then when it comes to remortgaging, use the equity to then pay off HTB.

getmore4less

The interest after 5 years is not that big at 1.75% probably cheaper than the rest of the mortgage.

More important is the amount you pay back is not fixed and varies with value.

ViolaLass

What is the rate on your mortgage?

amnblog

The value of the property is a factor here. If values are dropping you would wish to buy back early. If they are dropping why would you buy out?

MrSaver96

I would pay off the mortgage. You can remortgage in 5 years to cover the HTB loan. Given no interest being charged at present on the HTB the mortgage makes more sense (to me) to overpay.

jp1233

Mortgage is fixed for 2 years at 1.61%, so thats when i would be remortgage and consider paying off (probably) half of it. Just the working out if it's better to put the money into savings and pay from that or using what we have put into the mortgage (if we overpay).

Thanks all, the more opinions/advice the better.

ViolaLass

You could get 5% in Regular Savers - or are you already getting that with other savings? That comfortably beats the mortgage rate.