Lump sum at end of calendar year or drip feed through the year?

Just wanted to get some thoughts. I think a number of people are in the situation where they have a fixed mortgage deal in place where the rate is lower than the current interest rates offered on accounts.  My current mortgage rate is 2.64% and I can get 3.21% from Zopa for example. I can overpay 10% with penalty/charge per calendar year.
Now mathmatically I think it makes sense to save up all year and then overpay the 10% in December (as while saving, can earn higher rate of interest). However, psychologically there is something more rewarding about chipping away at the mortgage amount through the year. I guess it also removes the temptation of spending the savings on something else!
So what are others doing?

Comments

  • anna42hmr
    anna42hmr Posts: 2,844 Forumite
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    I overpay monthly as my bank makes it easy to do so, as they have it so you can set the direct debit higher than it needs to be, so essentially it means i don't have to worry about the temptation of spending the money elsewhere.

    That said as i have more money i want to allocate to the mortgage (but i can't as it would take me over the 10% allowance) i also have a pot where i save a  bit more in as well with the intent of using that to make a lump payment at the end of the current fix in 2026.  Just have to make sure i have the will power to not use the money in the interim. 
    MFW#105 - 2015 Overpaid £8095 / 2016 Overpaid £6983.24 / 2017 Overpaid £3583.12 / 2018 Overpaid £2583.12 / 2019 Overpaid £2583.12 / 2020 Overpaid £2583.12/ 2021 overpaid £1506.82 /2022 Overpaid £2975.28 / 2023 Overpaid £2677.30 / 2024 Target: £1800, £572.15 overpaid as at March so YTD = £355.88 Total OP since mortgage started in 2015 = £34,178.29
  • Zerforax
    Zerforax Posts: 353 Forumite
    First Anniversary First Post Name Dropper Combo Breaker
    edited 21 March 2023 at 11:40AM
    anna42hmr said:
    I overpay monthly as my bank makes it easy to do so, as they have it so you can set the direct debit higher than it needs to be, so essentially it means i don't have to worry about the temptation of spending the money elsewhere.

    That said as i have more money i want to allocate to the mortgage (but i can't as it would take me over the 10% allowance) i also have a pot where i save a  bit more in as well with the intent of using that to make a lump payment at the end of the current fix in 2026.  Just have to make sure i have the will power to not use the money in the interim. 
    Some great will power needed to avoid spending the lump payment pot for another 3 years!
    Do your monthly overpayments reduce your monthly repayment amount or reduce the term of the mortgage?
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