Mortgage renewal, overpayment advice needed

MagicFlute

Hi all, I am no expert in finances and I am just about to enter into a new mortgage renewal. I have a question about overpayments, would it be advisable to dump your savings into the mortgage or part dump, or keep them in savings? I would put in actuals but unsure about anonymity, data security etc plus relevance.

However as an example, if a house is worth 450k, you have a 200k mortgage & 80k savings.

Many thanks

jrawle

The rate on your new mortgage will almost certainly be higher than you can earn on savings, so from a purely mathematical point of view, you will be better off overpaying by as much as you can.

However, you need to ensure you have enough savings to act as a safety net in case your circumstances change, such as losing your job. This is a judgment only you can make. I would always prefer to keep enough money back to stay afloat for at least two years if I suddenly had no other income.

As you already have substantial savings, you should also plan to overpay each month once your new mortgage starts. Naturally you should ensure you don't exceed the overpayment limits for your particular mortgage deal. Typically it may be something like 10% of the loan (£20k per year for your example) but do check.