Overpayment or Save

Hi all

Looking to understand if my current plan is a good one or if I’m missing some pitfalls! Appreciate any guidance :) 

I’ve got my residential and a BTL mortgage. 

Residential 20 years left is repayment and has £130k outstanding on 1.6% which runs out in May 2024. 

BTL 25 years left is interest only and has £147k outstanding on 4.9% which runs out in July 2028. 

I’ve got the means to be able to overpay 10% on both my mortgages - but with interest rates where they are I’m considering:

- Putting the money for the residential in an easy access ISA at 5% until my remortgage comes up and then reducing my mortgage at that point. 

- Putting the money for the BTL in a 3 year fixed savings account at 5.95%. 

My thought is I’ll beat the amount saved in interest (marginally!) - but I feel like I might be wrong….so would appreciate any guidance. 

Thanks

PP

Comments

  • My own preference between the two options you mentioned would be to save ( in the form of your choice) rather than overpay mortgages. And, depending on your age and a host of other factors, I might want to reassess the wisdom of having the two mortgages, sell the BTL, and look at many and varied investments' and savings' options in more detail. All the best.
  • bmthmark
    bmthmark Posts: 297
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    I'm in a similar situation. I have a mortgage of £135k and on a fix rate of 0.99%.
    I also am able to overpay and have been able to do this for the last year or so.

    I decided to overpay by £400 and save £400 each month. I know the sensible option would be to save it all as savings interest rates are very good.
    However seeing the mortgage drop by a large amount each month gives me a lot of motivation to continue.
    I'm also saving a bit as well, but the trouble with that is that its tempting to spend.

    My aim is to get the mortgage as low as possible before my good rate is over

  • RelievedSheff
    RelievedSheff Posts: 11,125
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    bmthmark said:
    I'm in a similar situation. I have a mortgage of £135k and on a fix rate of 0.99%.
    I also am able to overpay and have been able to do this for the last year or so.

    I decided to overpay by £400 and save £400 each month. I know the sensible option would be to save it all as savings interest rates are very good.
    However seeing the mortgage drop by a large amount each month gives me a lot of motivation to continue.
    I'm also saving a bit as well, but the trouble with that is that its tempting to spend.

    My aim is to get the mortgage as low as possible before my good rate is over

    We are in a similar situation to yourself and do a mixture of overpaying the mortgage and saving each month.

    Our mortgage rate is higher at 2.34% and is fixed until May 2026 so we want to get as much as possible paid off before remortgage time comes around. 
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