Mortgage overpay vs invest

grumbler

Hoenir said:

Newbie_John said:

You haven't really mentioned the key things - mortgage rate and how much savings you have?
£100 is not much really, I would open one of the regular saver account and put money there.
For example First Direct pays 7% and that will beat majority of mortgage rates (not sure if you can pay out without losing interest so this is just an idea).
Gives you access to cash in emergency etc. 

And getting 7% in interests is better than paying 5% (assumed) mortgage rate.

The 7% averages out at around 50% of that over the course of a years saving. Headline numbers draw people in. 

Nonsense. You get 7% on the running balance, on every pound saved, not on the final balance - the same like you pay interest on your mortgage. It makes much more sense to save £100 monthly and to make one-off £1.2K overpayment when the regular saver matures, although for just £100 monthly the monetary difference will be small.

However, generally, if you can get higher net interest on your savings than you pay on your mortgage, it makes sense not to make overpayments at all - until the situation changes.

Hoenir said:

grumbler said:

Hoenir said:

...Shortening it will save you thousands in interest,

....

Have a play on the calculator below, You may well be surprised. 

https://www.calculator.net/mortgage-calculator-uk.html

Does it take into account the interest you can get on your savings?

Savings rates are progressively drifting lower. Being aware helps to focus ones mind. 

People minds are different and there are fixed-rate savings if you want to make long(ish)-term plans.

Deniseconfused

Im very rubbish at saving and keeping savings - said currently whilst on another cruise 🤣

Ive decided to overpay my mortgage by £1761 a month on top of my monthly payment  ( its within the amount allowed ) so my mortgage payment is £3,500 a month and I plan to pay the mortgage off in about 6 years rather than the remaining 16. I will just keep adding to the amount each month with every rise or DD saving. 

Yes I could get more in savings, but this works for me to become mortgage free 

da4

So just to elaborate a little... I have about a years salary saved in a mix of ISA's & some easy access cash. I aim to up the £100 saving in the next few months so I wanted to walk before I ran kinda thing. 

Newbie_John

da4 said:

So just to elaborate a little... I have about a years salary saved in a mix of ISA's & some easy access cash. I aim to up the £100 saving in the next few months so I wanted to walk before I ran kinda thing. 

Yeah that's fine then.
Remember that when your savings exceed remaining mortgage - you can pay your mortgage in full as soon as your fixed term ends without any penalty - so this compares to typical mortgage overpayments while giving you access to cash whenever you need it.

All in all it's just down to mortgage interest rate vs savings interest rate, especially when you have plenty of savings.
If mortgage rate is 6% and savings rate 3% - it's better to overpay, if they are comparable (as they are now) - it's better to save really.

da4

Newbie_John said:

da4 said:

So just to elaborate a little... I have about a years salary saved in a mix of ISA's & some easy access cash. I aim to up the £100 saving in the next few months so I wanted to walk before I ran kinda thing. 

Yeah that's fine then.
Remember that when your savings exceed remaining mortgage - you can pay your mortgage in full as soon as your fixed term ends without any penalty - so this compares to typical mortgage overpayments while giving you access to cash whenever you need it.

All in all it's just down to mortgage interest rate vs savings interest rate, especially when you have plenty of savings.
If mortgage rate is 6% and savings rate 3% - it's better to overpay, if they are comparable (as they are now) - it's better to save really.

Thanks, I will hunt around and see what I can find. My current deal is fixed at 4.2% for 4 years so I have a little time I suppose.