Overpay mortgage every month or put money in savings

livi150

What is everyone’s thoughts about the best way to ‘overpay mortgage.

I’m in a fixed rate of 1.64% until May 2026 & determined to clear the mortgage off on this date.

i have been making overpayments taking full advantage of my overpayment allowance of £11,600 every year.

i bank with Virgin money & have a M plus saving account paying 2.02% & was planning on opening up a easy access cash isa that pays 3%.

What i cant get my head around is am i better off continuing to make monthly overpayments of around £966 or should i just pay the standard payment & put this extra money ( & also a bit more) into this cash isa paying 3% & use that to clear the mortgage off in 2026.

basically, what is the best use of the money every month now that savings interest rates are above my mortgage interest rate.

thanks in advance.

jimjames

Personally I wouldn't be paying off the mortgage any faster than required when your rate is 1.64% and you can get much higher rates on savings.

livi150

jimjames said:

Personally I wouldn't be paying off the mortgage any faster than required when your rate is 1.64% and you can get much higher rates on savings.

I don’t have any other debt ( apart from car finance) so i can afford to pay it off.

once my fixed rate ends it will prob jump massively no???

based on the calculator i found on here i would be better overpaying it, but on one of martins most recent shows it was said it was better to put into savings if the rate was higher, hence the confusion

IAAM

Hi livi150

I'm on a 1.64% fixed rate too and, although I really wanted to make direct OPs to my mortgage, it just doesn't stack up as being the best approach when our fixed rate is so low.

So, what I've done is to set up regular saver accounts (one is 4.5% for 12 months and one is 5% for 12 months) for the maximum amount allowable each month. At the end of the 12 months, I will then pay the proceeds into my mortgage. (The money I use for these accounts is money that I can commit to without any worries).

In addition to that, we were already overpaying our mortgage each month by £111 so these payments are continuing - and they go directly into our mortgage account.

Finally, I've only just started on the MF journey and so I'm still finding my feet when it comes to how much more money we can save each month. For the next few months, I will see how much we've saved each month and then I'll also pay that directly into the mortgage.

However, once our new (reduced) spending habits get into more of a steady state, I will look at setting up more regular saver accounts (over 12 months) and then paying the proceeds into the mortgage (provided the savings rate continue to be much higher than our mortgage rate).

Hope all that jumbled info makes sense?