Overpay on mortgage, further advance or save?

jolester

Hi all

Trying to decide what is best financially for us to do.

We have a mortgage, fixed at 1.92% until June 2025 with a balance of £361000
We have a further advance with same mortgage co, fixed at 3.09% until August 2027 with a balance of £120000

Our mortgage term is another (approx) 28 years (which I'd like to reduce)
We have only just taken out the further advance in August (to do a house extension) which was taken out over a term of 12 years

For the last 3 years we have overpaid £500 p/m off our mortgage.  

My questions are:

1. If we continue to overpay to the mortgage co, are we likely to have to tell them which debt we want the overpayment assigned to, or will they likely assign it off a) the highest debt/interest rate, or b) the debt they were originally assigning it to? (Or does it vary mortgage co to mortgage co?)

2. Knowing that I'm not happy to have the mortgage for another 28 years (taking me until I am 70!) would we still be best to overpay on the mortgage given the choice?

3. Would we be financially better off putting the £500 in a higher rate savings account each month, and then paying off a lump sum when it comes to re-mortgaging one of the above debts?  

Or is there something else we should consider?

Many thanks 

jamesmarks78

1) Dont know so would recommend you decide which you would prefer and then contact the mortgage company to ensure your overpayments are used in the way that you would like them to be

2) Yes

3) I am pretty sure you would save more money by overpaying the mortgage than you would by hvaing i=the money in a savings account and then paying a lump sum when you remortgage. This is partly because the interest you make in the savings account probably wont be much...might be a few hundred pounds. And also because if you wait until you remortgage to pay the lump sum then you will be charged more mortgage interest on your outstanding mortgage debt up until this period rather than overpaying now. I would pay as much as you can of the mortgage off now to save you paying alot of interest on your mortgage. This will probably save you 1000s in the long run and help you pay off your mortgage alot sooner rather than a hundred quid saved in a savings account until you remortgage. The only exception to this would be if you felt you may need the money in the savings account for a rainy day until you remortgage