Overpay or save...

weddingringman

We owe about 125k on our mortgage which costs £486 per month, of which £181 is interest and £305 is equity.

We have the Santander 123 account but even with a current balance of £15k, the interest on it is barely £10 per month. 

Do you think I should now start to overpay the mortgage? Using the majority of that money to reduce the mortgage would probably only make us more than £3 or £4 better off per month. 

We plan to upsize hence why I feel we should try to keep saving each month as ultimately we will need to borrow more money. 

Socajam

Me personally whilst we are dealing with the pandemic and not really sure where the economy will be say within the next 12 months, I would not overpay.
I would save as much as I can and if this time next year things are looking 75% better, than I would overpay.
You could save the money in Premium Bonds or any of those accounts from NS&I.

mortgagetakingages

Financially over paying is the better route. If you do find times are hard you can always release the equity in your property at that point. 

LRmortgage

mortgagetakingages said:

Financially over paying is the better route. If you do find times are hard you can always release the equity in your property at that point. 

If times are hard in the future, you’ll find it even harder to release the equity in the property. Sorry, but this isn’t good advice. 

mortgagetakingages

LRmortgage said:

mortgagetakingages said:

Financially over paying is the better route. If you do find times are hard you can always release the equity in your property at that point. 

If times are hard in the future, you’ll find it even harder to release the equity in the property. Sorry, but this isn’t good advice. 

That may be true if you are looking to release 100% of equity but even in difficult times having an asset you can use to access funds it would be possible. My point is that even reaching that situation is in itself something to calculate and if chances are just the fear of the what might be i prefer to deal with what's factual which is that holding money whilst paying interest on a mortgage means you are paying more than would need to. 

LRmortgage

mortgagetakingages said:

LRmortgage said:

mortgagetakingages said:

Financially over paying is the better route. If you do find times are hard you can always release the equity in your property at that point. 

If times are hard in the future, you’ll find it even harder to release the equity in the property. Sorry, but this isn’t good advice. 

That may be true if you are looking to release 100% of equity but even in difficult times having an asset you can use to access funds it would be possible. My point is that even reaching that situation is in itself something to calculate and if chances are just the fear of the what might be i prefer to deal with what's factual which is that holding money whilst paying interest on a mortgage means you are paying more than would need to. 

Lenders lend based on affordability, which is based on income and commitments. 

You could have a £1million property with no mortgage on it, but if you have no Or even low income you won’t be able to release a penny from it. 

Of course debt should be paid where possible and appropriately. However don’t ever rely on being able to “release equity” from your property, after all, no one is obliged to lend you that money. 

weddingringman

Thanks for the advice.... I’m going to do a bit of both. I’m going to overpay by £250 on the mortgage per month and try to maintain our rate of savings nonetheless. Hopefully it’ll feel like a bit of a game and in the long run, it’ll mean we are better off than have we not overpaid at all. 

grumiofoundation

mortgagetakingages said:

Financially over paying is the better route. 

Only if mortgage interest is higher than the return you can get elsewhere (whether fixed term accounts, investments).

mortgagetakingages said:

If you do find times are hard you can always release the equity in your property at that point. 

Not exactly 'instant access' though is it?

mortgagetakingages

Its true that a loan would be harder to come by if total catastrophe hit with employment. But not impossible i guess a 3 month buffer in savings would be a wise precaution but any more feels like overkill to me. 

dimbo61

How much you have in emergency savings depends on lots of factors.
Age, type of job and employer ! 
Single earner or joint earners ?
If I was a self employed airline pilot earning £150,000 a year last year maybe having a £100,000 in savings might be a good idea.
Which again brings me back to Offset mortgages. Having a large savings pot in an offset account means instant access to a pot of money if needed.
6/9/12 months of income if self employed.