Does overpaying make sense if you'll sell before paying it off?

Xicrwayt

Hello all
I've tried to find the answer to this but it just won't make sense to me. 
I have a five Yr fixd term and hope to sell around the end of the fixed term. I could afford to overpay at a rate that would reduce my mortgage term from 25 yrs to about 12. 
But I'd then be buying a more expensive property which would likely mean taking a similar amount in mortgage as I had to begin with (though lower LTV). 
In this circumstance, as I won't be able to pay the mortgage in full before selling, does it make more sense to overpay or to save that overpayment? What are the factors I need to consider? 
The overpayment would not incur charges as below the 10% and I haven't found a savings account that would give a higher interest rate than I am.paying on my mortgage. I understand that by overpaying I'd save ££££ in interest, but can't get my head around whether I'd ever have to pay that anyway if I'm leaving the property before completing the mortgage? 

Also, if overpaying is the way to go, what is the difference between monthly and annual payments and how do I make sure the overpayment is off the capital as I've heard I should do? 

Thank you!!!

born_again

Lower LTV = lower interest rate.

Hoenir

If there's a net gain by overpaying the mortgage why wouldn't you do so. Need be no more complex than that. 

Brie

It must be off the capital one way or another.  Some banks will lower your monthly payments rather than shorten your term.  But the money is still against the capital and will reduce the interest you are paying so that's a good thing.  

Sg28

Financially the only question to ask is whether savings rate is higher than your mortgage rate. 

If its higher, save the money. If the mortgage rate is higher overpay. 

MasterplanC

The other thing to consider if you sell before the end of your 5yr deal is whether there are any early repayment charges (ERC). My 5yr mortgage for example has a 2% ERC, meaning overpayments not only avoid interest, but also the ERC - if sold before the end of the deal.

BikingBud

Overpaying reduces the capital you owe.

Therefore your interest accrued is lower, compounding works both ways and as you realised might halve your current term.

Less capital you owe means you have more equity in the current property and therefore reduces the capital you might need to borrow for the next purchase and therefore reduces the overall interest you will need to pay etc, etc.

If you cannot save, or invest, at a higher rate than your mortgage rate then reducing capital and therefore interest is the way forward.

For full 10% overpayment:

• Annual overpayments at start of year reduces capital earlier therefore saving the interest on 10% for the remaining term.
• Monthly overpayments will reduce capital throughout the year and save interest as each payment occurs on that overpayment for the remainder of the term.
• Annual overpayments at end of year will incur 1 years extra interest on the overpayment vice start of year, above.

See for paying off 10% start of year M2 v end of year M1, slightly better for early but massively better for consistent overpayment, saving >£250k and reducing term massively.
 Hope that makes sense but try here for yourself calcs: http://www.locostfireblade.co.uk/spreadsheet/Index.html