Does it make more sense to pay off student loan or overpay on mortgage?

jt1413

I was hoping someone could help with the maths on this one. 

I was wondering which I am better off doing, paying off my student loan in full or overpaying on my mortgage?

Currently securing a 227.5k mortgage at 4.39% on a house, hopefully moving in in the next 12 or so weeks.

I also have a plan 2 student loan of £7025, paying off £127 a month on a £43k salary (secure NHS job).

Myself and my husband will have 30k in savings left once the house sale goes through (obviously have this+deposit at the moment), so have the capital to pay off the loan in full now, or pay some off before the mortgage starts to get it down if thats better. I don't know if this is more beneficial so that I don't have the £127 taken out of my pay each month and I can then concentrate on overpaying as much mortgage as possible when I move in to the house.

Can someone explain which option is best? 

(Husband has £80k on his student loan and is below threshold so he is irrelevant if that helps).

MorningcoffeeIV

As always, it depends.

If you're sure you're going to repay the student loan in full, then it may be worth paying it off. That will depend on future earnings and age. You also need to consider whether taking such a big chunk out of your savings is wise.

If not, then you're probably better off letting it run.

jt1413

MorningcoffeeIV said:

As always, it depends.

If you're sure you're going to repay the student loan in full, then it may be worth paying it off. That will depend on future earnings and age. You also need to consider whether taking such a big chunk out of your savings is wise.

If not, then you're probably better off letting it run.

So I'm 28, graduated in 2017 and the calculators suggest I will pay it off in the next 5-6 years, well within the 30 year limit. 

I would think my pay is somewhat capped by my profession and the fact I am at the top end of my career ladder within the NHS, I do have steps within my band to go up so currently I could expect future earnings off 55k or so (if no rises etc). 

The savings issue isn't mega, I'm happy to move into my home with 23k savings, we both save each month and so this figure is getting larger not smaller. 

Maybe it's worth putting regular overpayment into that rather than a lump sum in full?

MEM62

What is the interest rate on the student loan?  I see no compelling reason to pay it off in favor of your mortgage.  Pay your mortgage and you are building equity. 

silvercar

Is affordability (for the mortgage) an issue? If so clearing the student loan would help increase the max you are likely to be able to borrow. If you can get the mortgage even with the student loan, then I would be tempted to keep the loan at least until you have moved into your new home. That way you have savings for unexpected expenditure.

jt1413

MEM62 said:

What is the interest rate on the student loan?  I see no compelling reason to pay it off in favor of your mortgage.  Pay your mortgage and you are building equity. 

It's currently 6.5% but I think it's increasing to 7.5% this year. 

jt1413

silvercar said:

Is affordability (for the mortgage) an issue? If so clearing the student loan would help increase the max you are likely to be able to borrow. If you can get the mortgage even with the student loan, then I would be tempted to keep the loan at least until you have moved into your new home. That way you have savings for unexpected expenditure.

No affordability won't be an issue - it's simply something I'm wondering if it makes more financial sense to be done with while we have the money lying around or whether that money is saving us more in our home

Jami74

£7,000 in Chase at 3% would earn about £17.50 interest in one month.
Interest rate of 6.5% for one month on £7k is about £38. 
Personally if I had £30k in savings and only £7k left on my student loan then I would pay it off. You would still have £23k in savings and have a little bit extra in your wages each month. 

Paul_gorbo

I would not trust bankers, especially with the situation that is happening in the world right now. It may happen that one morning they will increase your loan costs because it's in the fine print on your contract.

enthusiasticsaver

Your student loan is quite expensive at the moment because of the high RPI.  Given you earn over the threshold and will definitely have to pay it all back I would be tempted to pay that off given it is costing you more than your mortgage as a higher rate of interest.