Overpay or save?

Capybara84

Hi,
I hope this post is in the right forum -apologies if not. We moved house 12 months ago. At that time we kept back £20,000 so had a slightly lower deposit however LTV was still lower band and we borrowed around £240,000 at 1.09% on 2 year fixed -so we still have one year to go before re-mortgaging. We still have the £20,000 as we haven't yet made any major improvements to the house. My question is this (and I appreciate with the current market volatility this may be hard to answer) -would it be better to overpay on our existing mortgage using the £20,000 or put the £20,000 into a one year fixed saving's account - the complicating factor is that we will want to keep back around £50,000 for home improvements when we re-mortgage in a year's time(so either £30,000 more or the whole £50,000 depending on what we do). Please let me know if more information is required. Many thanks in advance. 

K_S

@capybara84 Unless I'm missing something obvious, it's almost certainly better to plonk it in a notice account or 6 months or 1 year fix (see here for MSE savings best buys https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/ given that the best 1 year fix is offering 3.91% compared to overpaying a 1.09% mortgage.

In the event that you decide you don't need to release cash when you remortgage, you can always use this 20k to bring down the loan size.

Capybara84 said:

Hi,
I hope this post is in the right forum -apologies if not. We moved house 12 months ago. At that time we kept back £20,000 so had a slightly lower deposit however LTV was still lower band and we borrowed around £240,000 at 1.09% on 2 year fixed -so we still have one year to go before re-mortgaging. We still have the £20,000 as we haven't yet made any major improvements to the house. My question is this (and I appreciate with the current market volatility this may be hard to answer) -would it be better to overpay on our existing mortgage using the £20,000 or put the £20,000 into a one year fixed saving's account - the complicating factor is that we will want to keep back around £50,000 for home improvements when we re-mortgage in a year's time(so either £30,000 more or the whole £50,000 depending on what we do). Please let me know if more information is required. Many thanks in advance. 

Capybara84

Thank you. That was my plan but I thought I might be missing something!