Overpay or save?

skemp1

Hello,

Looking for some advice if anyone can help?

I currently have a mortgage that is fixed until February 2027 at 1.03% and has 27 years to run. I have been overpaying £600 a month for a quite some time to try and get the amount down which is now at around £313k, (house is worth around £650k)

Seeing the interest rates rise for savings has made me think if I am doing the right thing in overpaying. I have conflicting thoughts about it. 

In one way I'm thinking of paying off the mortgage as much as I can between now and the fixed rate ending in 2027, so the rise in interest rates will not effect me as much.

Then I think whether it would be better to get a 5% "locked" savings account for the next 4 years and pay the £600 a month into there instead and then withdraw it and pay this off the mortgage off once the fixed rate ends. 

Any advice or help would be appreciated. 

Thanks  

snowqueen555

Yes your thinking is right, well done on getting such a low mortgage. I will be on 5.39% so will be overpaying that once I've built up my emergency savings first.

GiantTCR

skemp1 said:

Hello,

Looking for some advice if anyone can help?

I currently have a mortgage that is fixed until February 2027 at 1.03% and has 27 years to run. I have been overpaying £600 a month for a quite some time to try and get the amount down which is now at around £313k, (house is worth around £650k)

Seeing the interest rates rise for savings has made me think if I am doing the right thing in overpaying. I have conflicting thoughts about it. 

In one way I'm thinking of paying off the mortgage as much as I can between now and the fixed rate ending in 2027, so the rise in interest rates will not effect me as much.

Then I think whether it would be better to get a 5% "locked" savings account for the next 4 years and pay the £600 a month into there instead and then withdraw it and pay this off the mortgage off once the fixed rate ends. 

Any advice or help would be appreciated. 

Thanks  

do both, overpay by 300 a month and put 300 into savings

K_S

@skemp1 Personally, at any mortgage rate up to around 2%, I would just feed any spare money into a high-interest regular saver (4-5%), a top easy access account (2.8% - 5% depending on your options), etc. Periodically, when the pot grows big enough you can look at putting in a longer term fix. It's a bit more effort than simply pumping it into your mortgage but you can save a good amount of money by doing so, especially over a 4 year period.

When it comes to re-mortgage time, you can always use the savings to reduce your loan size on the new mortgage.

skemp1 said:

Hello,

Looking for some advice if anyone can help?

I currently have a mortgage that is fixed until February 2027 at 1.03% and has 27 years to run. I have been overpaying £600 a month for a quite some time to try and get the amount down which is now at around £313k, (house is worth around £650k)

Seeing the interest rates rise for savings has made me think if I am doing the right thing in overpaying. I have conflicting thoughts about it. 

In one way I'm thinking of paying off the mortgage as much as I can between now and the fixed rate ending in 2027, so the rise in interest rates will not effect me as much.

Then I think whether it would be better to get a 5% "locked" savings account for the next 4 years and pay the £600 a month into there instead and then withdraw it and pay this off the mortgage off once the fixed rate ends. 

Any advice or help would be appreciated. 

Thanks  

housebuyer143

It makes much more sense to pay it all into savings and then pay off a lump sum at the end. 4% is much higher than 1%.