Overpay mortgage or keep an emergency cash fund?

Hi all, this is my first ever post on the forum! I am looking for some advice on overpaying my mortgage versus keeping some savings/emergency cash fund. Until recently I always felt that it was important to have an emergency fund, and for the past few years I have kept about some cash in a savings account 'just in case'. However, reading Martin Lewis's advice, he says it is often better to clear debts rather than saving.

I have an interest only mortgage with a mortgage reserve function. I can currently borrow about £30000 at 4.59% if needed against this. The mortgage interest rate is currently 1.59%. I have about £10000 in a savings account, with interest rate 0.15%. I have pretty good job security (I'm a doctor). I have income protection insurance, life and critical illness cover, and am contributing to an NHS pension.

What I am considering doing is paying all of my emergency cash into the mortgage. My thinking is that in an emergency I can borrow back using the mortgage reserve. I would obviously need to rethink my emergency funds before the mortgage completes (in 13 years). Is this sensible or not?

Many thanks for any advice!



  • important to have an emergency fund. It’s for the unpredictable. If you have good job security then 3 months expenses should be enough. 
    No one has ever become poor by giving
  • Thanks. I have been keeping an emergency fund, but I read on the site:

     So overall, whether an emergency happens or not, the best result is to pay off your debts with your savings. The only time to beware of this is if you're not assured of being able to reborrow the cash.”

    Was just wondering if I should reconsider.  
  • Emmia
    Emmia Posts: 2,917
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    edited 8 December 2020 at 9:11PM
    I think you should have an emergency fund, large enough to not require a loan in many fairly likely circumstances - e.g. if the boiler packed up, the car failed it's MOT and needed an expensive repair or if you had to pay for a replacement window or roof repair...  

    Just because you are likely to be able to easily borrow money today, does not make that true tomorrow.

  • QueenJess
    QueenJess Posts: 3,608
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    I don't think this applies to mortgages in the same way.  I believe the advice is to pay off expensive (non-mortgage) debt first.  I would personally keep the emergency fund separate.  It's annoying in a way to pay for liquidity with bad interest rates, but I would much prefer that than have to try and borrow and be at the mercy of whatever loan interest amount I would be given at the time.  It does give me peace of mind though and more than it would if I had nothing, but a smaller mortgage.

    Don't forget it isn't just for if you lose your job.  It's any emergency and in my experience it always happens all at the same time.  E.g. roof caves in, washing machine dies, car has a pretty major fault etc etc.
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