Fixed rate mortgage overpayment question

Steve_esccos

Hi,

I currently have a 5 year fixed rate mortgage for £55400 with a 2.2 interest rate, and when finished in 2024 will complete the payments for the house. I have 4 years and 3 months left to pay and am now in a position to make an overpayment. I can over pay up to 10% each year. The bank has told me I can’t reduce the mortgage term but can still overpay and reduce the monthly payments. I would like to know if this is worth doing? and will it save me any interest or would I be better off putting the overpayment money in a savings account?

Steve_esccos

Forgot to mention I’m looking to overpay the whole 10% (£5400) in one lump sum.

[Deleted User]

If you have such a short term left on the overall mortgage I would imagine the interest you are paying is almost negligible at this point so its not going to save you thousands of pounds of interest by overpaying the mortgage.

It probably just boils down to would you rather have £5400 in savings you can use for any purpose, or save a small amount of interest. Its not even a case of repaying your mortgage early as youve got to reduce your payments down to allow you to make the overpayment.

I would probably just stick it in a savings account and clear the mortgage the day the 5 year fixed rate expires

getmore4less

Unless you can net more than the mortgage rate or want to top up pension or may need cash might as well just pay some off.

5k 2.2% 4y over £400 saved.

mrsplinter

You can get a five year fixed rate savings account with UBL UK for 2.36% which is higher than your mortgage rate.

[Deleted User]

or;

Pay the £5400 in to the mortgage. They say they will reduce your payments down as a result so then pay the difference in to a regular saver account as you can get them around 2.75%

or;

Keep your £5400 in a normal savings account paying 1.3% for instant access and then drip feed in to a regular saver. At the end of the year close the regular saver back in to the instant access and repeat


You are talking about a few hundred pounds of interest saved or earned over 5 years and I would bet the difference between any of the options would be very marginal. So just do what makes you most comfortable

Steve_esccos

Thanks for the replies. ����