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

alanyau88

@welshlad46 grumbler is correct partially.  You can still re-mortgage with specific lenders up to 9 months before your fixed date ends.  Regular savers will be beneficial if you can get it but there are conditions attached.  You can save money if you are savvy and do the maths.  Putting £200 into a regular saver or high interest ISA will be beneficial if you can.  You WILL save money than repaying monthly on the 1.44% fixed mortgage.

I am different from most as I tend to use the cheap money to re-invest to maximise profits although the investments I make are not without risk, I have plans in place to mitigate the risk and therefore can repay the whole mortgage if and when necessary.  Most people are in a different situation and therefore it doesn't work for everyone.

In your case, with your zero risk attitude, I would NOT overpay on the mortgage but instead divert the £200 to a high interest rate account.  You can go for a 7% regular saver if you bank with First Direct or Skipton BS.  You could even go for a 3 year fix rate at 6.06% with Investec.  If you have over £20,000 in savings accounts already, then put the £200 into a 3 year fix Cash ISA at 5.55% with Virgin Money.

Be warned though as the £200 a month even for 4 years won't really save you a massive amount and you're talking around £800 saving.  It's still better than paying it off monthly though as you can see.

welshlad46

When I put it into the overpayment calculator it said it would take over 6 years off the mortgage if I did the £200 over which I was quite happy with to be fair.. my mortgage is only £366 a month so by putting this £200 a month since the start of the year to virgin as overpayment (£1000 paid so far) ive not missed it and thought if come 2027 the rates are still crazy high.. ar least it has got me used to paying this kind of money as I worked out if it was due now it would be around £545 a month on rates at this current time. So I just wanted to know the best thing to do with the extra £200 im paying to make the most benifits from it to be fair. How I have been overpaying with virgin has been simple by just sending it over as soon as I get paid and ive checked with them to check they have received every payment which they have and ive logged down how much I have paid extra

welshlad46

@alanyau88  when would you recommend paying the money as the overpayment then after ive saved it via the savings account..

welshlad46

Sorry.. ive no idea why that went as bold :-) haha

simon_or

welshlad46 said:

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 

1.44% interest rate on your mortgage fixed for another 4 years, £200/month spare cash, it's a no brainer to put it into the best easy access or notice or regular saver that you can rather than overpaying.

In 3-4 years time when it's time to remortgage you'd have around 9-10k cash which you can use to bring down your loan size when the mortgage rate jumps.

welshlad46

@Simonor so when doing the remortgage I would then say that I want to pay off a lump sum prior to tieing into the new deal is it? 

Once again sorry for sounding dull just trying to find out how to go about it

tetrarch

Just a clarification. When I said the whole term before, I was referring to the whole 5 years of the fix - apologies for any confusion.

As for tactically in four years time, you will (normally) able to pay 10% of the principal. You should be able to synchronise this when you start your new deal

Regards

Tet

Marmot

You'll just need to leave a small gap between when your current fix ends and your new mortgage product begins (if you are swapping onto another fixed deal).  Say current fix expires on 1st of month, you set up new deal to begin 2/3 days after that (someone else might know exact detail on how many days...)  As the first deal expires you will be put onto that lender's SVR.  You can then normally make >10% overpayments without penalty.  Then your new deal will start a few days later.  You will have to pay a few days at the SVR rate.  When you book your new deal with new lender you'll need to provide proof of funds (a bank statement) to show why the amount you want to borrow from 2nd lender is considerably less than current balance.

alanyau88

@welshlad46 Marmot is correct.  If your fixed rate expires on 01/01/2027, then you can repay the lump sum on 02/01/2027.  I advise you to speak to a good fee free mortgage broker between 6 to 9 months before your fixed rate expires to set it all up so that your solicitor has the mortgage offer and will complete on 02/01/2027.  You can pay a £10k lump sum or more, it's entirely up to you although I suggest going for the cheapest LTV at 60% or less to get the best rate possible with a minimal product fee.  You don't have to take up this mortgage offer and can always hunt for a better one 3 months before your fixed rate expires but once you have it, you have it, and you can opt for the best rate depending on financial conditions nearer the date your fixed rate expires.  

canarydan

TheAble said:

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?

My understanding is that if you reserve early, your current deal roles straight into the new one, denying you a window to make unlimited overpayments without incurring early repayment charges. You would remain tied to the maximum 10% charge free overpayment a year rule.

Whether you could reserve a rate and get it to start a couple of days after your existing deal expired, so you effectively had two days on the SVR in which to make a big overpayment, I'm not sure.

I have a similar dilemma in that I've got £2-3k I could potentially chuck at my mortgage. I'm currently on a 0.93% rate that I took out October 2021 (yes, I'm one of those who got greedy and took the dirt-cheap two-year deal rather than locking in slightly higher for five-years). However, I locked in a 4.39% deal two months ago so am now debating whether I should chuck that £2-3k into a 5-6% fixed-term savings account as it will probably earn me more in interest than it would save me in monthly mortgage payments if I were to use it to overpay.