Overpayment Timing

mr_tash

Hi,

My fixed 1.64% mortgage deal expires in May. I always make my 10% over payment at the start of a new year but as I'll be changing to a new deal with a higher rate, would it be more beneficial to make the payment when I'm on the new deal if end up staying with the same lender?

I'm already in the 60% LTV bracket so no gains there if I overpay on current deal. 

jrawle

This depends on where you have the money before you use it for overpayment. It's quite easy to earn more than 1.64% on savings at the moment. If you can earn a higher rate of interest, it's best to keep the savings. Your new deal in May will have a much higher rate, so it's unlikely you'll find a matching savings rate, so overpay then.

If you can afford it, you may also be able to pay off some more of the mortgage as a lump sum while you are "between" deals. If you are sticking with the same lender, do check their rules on this, though.