Single Overpayment or Fixed Rate Savings First

kirkd

Hi,

I've come into some inheritance and plan to use it to reduce our mortgage, however I'm trying to work out the best time to do this and if I should put it into a savings account first.

We're on a tracker mortgage (thanks to the mortgage adviser claiming they couldn't see interest rates continuing to rise in April) and the current rate is 5.51% on a £184,000 balance with 19 years remaining.

The inheritance is coming in part payments, but overall I'm hoping to be able to overpay £90,000 once the property is sold, so could take another 6 - 9 months before that comes in.

Metro Bank are offering 5.8% for a fixed one year savings account, so should I put around £30,000 into a savings account that I have now and then pay a large overpayment when I have all of the inheritance or overpay £30K now and then again when the property is sold and I get the rest of the money?

Brie

Frankly I'd be tempted to just slap the £30k on to the mortgage.  Assuming that the mortgage rate does NOT change the extra you would get if you put it in the savings account would be about £87 in a year.  Of course if the mortgage rate does drop then the savings account is more of a winner.

Question is though, can you put £30k on the mortgage?  Many mortgages have a 10% overpayment maximum per year so that would be about £18k instead.  So maybe go half and half?