Which is better? Overpay or Save

Hi. I'd appreciate your advice.

Options are overpay mortgage by £300 a month where interest rate is 1.99% or;

Put £300 a month in to a regular saver where interest rate is 5% (and use lump sum to overpay mortgage at end of 12 months)

What do you think?

Replies

  • TropicallyTropically Forumite
    427 Posts
    Fifth Anniversary 100 Posts Name Dropper
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    Mathematically, saving at 5% is better.

    People don't behave with mathematical precision. Ask yourself:
    * Will you keep that money in the regular saver?
    * Will you really apply it to your mortgage at the end?
    * Will you feel better if your savings balance is higher, or your mortgage balance lower?

    If you think you will stick to the plan, you should save at 5%. If you think you might be tempted to take money out of the regular saver and spend it frivolously, apply it to the mortgage where you can't access it as easily.
    Mortgage started at £318,000 in June 2016. Original MF - 2041 :eek:
    2nd Property Mortgage at £275,000. Mortgage free: 2049 :eek:
    Total OPs: £29529
  • kparky1kparky1 Forumite
    29 Posts
    Thank you - I struggle to work out the maths.

    Yes, I have track record of sticking to the regular saver so that sounds like the best option.

    Last time I used it to pay £3698 off the mortgage (after 12 months). Although it is nice to see the mortgage come down.

    thank you
  • NorthernMonkey1NorthernMonkey1 Forumite
    328 Posts
    Sixth Anniversary 100 Posts Combo Breaker Mortgage-free Glee!
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    If you know you wont dip into it, then the 5% savings rate is much better than the 1.99% you're paying
  • getmore4lessgetmore4less Forumite
    45K Posts
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
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    kparky1 wrote: »
    Thank you - I struggle to work out the maths.

    Where do you have the problem?

    Each £1 either saves £1.99% or earns 5%
  • kparky1kparky1 Forumite
    29 Posts
    Great. thanks for the confirmation.
    I'm going to set regular saver in the morning
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