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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?

Comments

  • Tropically
    Tropically Posts: 427 Forumite
    Sixth Anniversary 100 Posts Name Dropper
    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
  • kparky1
    kparky1 Posts: 29 Forumite
    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
  • If you know you wont dip into it, then the 5% savings rate is much better than the 1.99% you're paying
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    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%
  • kparky1
    kparky1 Posts: 29 Forumite
    Great. thanks for the confirmation.
    I'm going to set regular saver in the morning
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