174k at fixed 4.28% 35 Year Term, worth overpaying...?

IAMIAM

If I reduced it to 160k, I have calculated it will only save me circa £500 per year compared to a balance of £174k.

Have I calculated this correctly?

weddingringman

The extra £14,000 of borrowing will cost nearer £600 extra in year 1.

I guess the question you personally have to ask is whether that £14,000 is better off in your own account, earning interest, than it is being deducted from the mortgage to save £600 per year. 

simon_or

Closer to £600 (4.28% of £14,000) to start with and then going down over the years.

What else could you do with the excess cash - put it in savings, cash ISA, s&s ISA, SIPP, etc. 

Personally, for a sub 5-6% mortgage my preference would be in this order - SIPP, s&s ISA and then mortgage overpayment. But everyone will have a different view on this.

Newbie_John

It's a question similar to should I take mortgage for 20 or 30 years? Both answers are correct depending on circumstances.

a) If you overpay £14k and shorten the length of the mortgage - you'll save £40k over the duration of your mortgage and shorten it by 5 years.

b) If you keep the length but shorten monthly payments - the mortgage will be £768 cheaper a year - £27k over the 35 years.

c) Do you want to finish paying your mortgage quicker, do you want to pay less monthly? 

d) And as above mentioned, if you're hitting your personal savings allowance so cannot fix into a savings account of 5.4% (currently highest rates), have all sorts of ISAs, emergency's pots, no plans for big spending in near feature, stable jobs so easy to replace this amount shortly - then why not.

We've had similar situation and went with overpaying in b) option to keep the same monthly payments before interest rates on our mortgage triple..  

IAMIAM

Thanks, going to keep the 15k in saving account for the next two years until next mortgage renewal time....

IAMIAM

Is is pretty easy to apply for additional borrowing with HSBC in the future if I needed it back? As in, a couple of weeks turnaround to drawdown 10-15k from application.....

dimbo61

So now the government  will tax the interest you earn on savings unless you save inside a Tax wrapper ISA !
You might not earn 4.28% after tax however having an Emergency saving pot is always a good idea.
New car, new roof, new kitchen or replacement boiler may happen 🤔 
Live the MSE way !
Save extra into a pension if possible ?
Build up savings for a rainy day 
Overpay any and all debts starting with the most expensive
Use MSE to save on everything from Car insurance to holidays and everyday spending