Another Overpayment Question

draker

Hi there,

I am in a bit of a qunundrum about overpaying a mortgage on a house I let out. Sorry, this might be a long one.

Basically prior to letting the house, I increased the mortgage from 67,000 to 84,000. At present, the money is sitting in 2 ISAS (£3,000 last year & £3,000 this year), the remainder is sitting in a Cahoot 5.60% savings account which is drip feeding a monthly saver Dudley account at 7%.

The additional mortgage advance was initally to be used a surplus to cover any void rental months and as a deposit for a repayment mortgage on my share of a joint house purchase). To date, not much money has been needed and it is sitting in the various saving accounts.

The rental mortgage is with Northern Rock which has flexible features which allow overpayments and daily interest calulation. The mortage rate is 4.89%. I currently only repay the interest on the mortgage.

My question is, should I continue to leave the monies in the savings accounts, or should I now use some of this money to repay more to pay off more each month to pay of some the capital.

The let out house has three years to left to run on the current fixed rate mortgae deal.

Any advice would be much appreaciated. Thanks

John_M_Business

Given that it seems that you are accruing more interest in saving than you would be spending on the repayment plan, I would advise, whilst the current situation exists, not to pay off, but to pay all savings into the ISAs / Savings account and when the mortgage completes - to pay off the extra.

Although that assumes that you're on a fixed rate for the entire duration of the mortgage. If you are going to have a higher rate for additional years (2??) then try to calculate what you would be paying over the whole period in Interest terms and then compare with your savings interest (after tax).