5 yr fixed till 2027..1.44%.. overpay or put money into savings?

welshlad46

As per headline we are a year into a 5 year fixed at 1.44% and have been overpaying £200 a month since start of the year.. have £1000 over upto now. 

Have been reading that im better off not doing this and putting into a savings account with a higher %? I currently have a Marcus savings account paying 4%.. 

Virgin mortgage has a maximum of 10% on overpayments but if I was to save how would I then go about overpaying the lump amount and when would this payment be made

Thanks in advance 

alanyau88

Seriously?  This all depends on your financial position, how much you want to save, and how much you are earning.  The savings you make are all taxable so everyone's position is different.  Without knowing your financial background, I don't think anyone can advise you properly but generally it would be better to save the money in a higher paying savings account.  If you are looking to repay it, then the prime time is when your fix ends and you re-mortgage so you don't have to pay any penalties.

Everyone is different so no one can advise you without knowing whether you are savvy with your money or you are a materialistic spender.  Only you should know.

tetrarch

On a 5 year 1.44 fix you don't want to overpay AT ALL for THE WHOLE TERM

Can you underpay for the rest of the year? (i.e. pay the minimum amount you were committed to pay for the year overall)

Your underpayments are costing you the difference between the 4% and the 1.44% - after accounting for tax of course

Regards

Tet

grumbler

Even after 45% tax 4% is more than 1.44%, but there are tax-free cash ISAs, instant-access accounts ATM paying 4.5%, regular savings accounts paying even more and fixed-rate savings if you have a lump sum to save (up to 5.8%).  It's very unlikely that during 5 years savings income will drop below 1.44%, so a big overpayment can be made when fixed-rate term ends.

B0bbyEwing

Interesting (don't want to overpay AT ALL). 

Say OP wants to max out their overpayment allowance. 
Wouldn't it then be best to chuck this in right before their deal ends & then when the new one starts they'd have another fresh max allowance available? 

Whereas if they don't overpay at all throughout the whole term as advised here & only overpay once they remortgage, they still only have 1 lot of maxing out available to them. 

If I've understood it wrong then please explain. 

welshlad46

alanyau88 I did explain that I have been paying £200 a month this year and want to continue at least this amount for the rest of this fixed term up until January 2027 so just trying to work out if it is best continuing paying the extra £200 a month to virgin as a overpayment or putting that £200 into a savings account I have open at 4% and then if I did this when would the best time to used that saves money to pay off.. at the end of each year? Or at the end of the fixed term? Or just before it finishes..

Still learning and trying to understand how it all works but also just trying to save as much to get mortgage paid off sooner. There is 18 years left on it

Thanks for the replies 

grumbler

B0bbyEwing said:

Interesting (don't want to overpay AT ALL). 

Say OP wants to max out their overpayment allowance. 
Wouldn't it then be best to chuck this in right before their deal ends & then when the new one starts they'd have another fresh max allowance available? 

Whereas if they don't overpay at all throughout the whole term as advised here & only overpay once they remortgage, they still only have 1 lot of maxing out available to them. 

If I've understood it wrong then please explain. 

My understanding is that overpayments are restricted only during the fixed-rate term. When it expires, the mortgage switches to some variable rate without restrictions. Make a big overpayment and then consider switching to a new fixed-rate deal.

welshlad46 said:

 I have been paying £200 a month this year and want to continue at least this amount for the rest of this fixed term up until January 2027 

This is jus about £10K over the remaining  4 years - very likely within the maximum allowed overpayment in the final year of the fixed term.

welshlad46

@Grumbler so you’d suggest saving the money into the savings account until 2027 and then when due to re mortgage/get in contact regarding locking into a new fixed deal.. pay the money off the new deal? Or do so just before it is about to finish the fixed deal at the 1.44%.

Sorry just trying to fully under:-)

grumbler

Generally, yes, but it's worth checking your mortgage T&C and asking the lender to make everything sure.
For saving £200/month the best you can do is to open First Direct regular saver (7%, up to £300 p.m.). When it matures in 12 months, move the money to a good savings account (fixed rate or ISA) and open a new regular saver.
Ignoring  possible tax on savings interest you gain about £200*12/2*(7%-1.44%)=£67 over the first year. More next years as your savings balance grows.

ElwoodBlues

If you don't use the overpayment allowance in a year, you lose that years allowance. Yes at the end of the fixed term you can probably make a lump sum overpayment fee free. But then you can't reserve a new fix 6 months early, you'll have to wait until you actually drop onto the SVR. So depending what rates are doing around that time, you could miss out if rates rise in those last 6 months. Statistically it's unlikely, but not impossible - look at the last 6 months.

I'm in your situation now, and in the current climate I don't particularly want to wait until next Jan to see what rates are then.

TheAble

ElwoodBlues said:

If you don't use the overpayment allowance in a year, you lose that years allowance. Yes at the end of the fixed term you can probably make a lump sum overpayment fee free. But then you can't reserve a new fix 6 months early, you'll have to wait until you actually drop onto the SVR. So depending what rates are doing around that time, you could miss out if rates rise in those last 6 months. Statistically it's unlikely, but not impossible - look at the last 6 months.

I'm in your situation now, and in the current climate I don't particularly want to wait until next Jan to see what rates are then.

How come you can't reserve early? Eg say you owe £200k and are going to pay a £50k lump at end of current fix, can't you reserve £150k?