Should I overpay my mortgage even if I'm planning to sell?

hgift7

Hi everyone, with current market I'm wondering if it's worth it to overpay my mortgage if we're planning to sell this year? I bought it at 150k and all the offers I'm receiving are between 140-155k only.  I'm just considering the fact that we might lose money because our house value is low. Thank you in advance for answering

Mark_d

Overpaying your mortgage means you pay less mortgage interest.  I would overpay on mortgage if your mortgage interest rate is higher than your savings interest rate.

Planning to sell should make no difference.If you lose £5k on the sale of the property then you will lose that amount of equity

jrawle

Whether you overpay or not is independent of whether you are about to sell, and for how much profit. If you can save interest over the next few months, that's the same whether you are selling or not. As always, think about whether you can earn more in interest in a savings account. Also think  about whether you need the cash to cover costs associated with moving.

hgift7

jrawle said:

Whether you overpay or not is independent of whether you are about to sell, and for how much profit. If you can save interest over the next few months, that's the same whether you are selling or not. As always, think about whether you can earn more in interest in a savings account. Also think  about whether you need the cash to cover costs associated with moving.

Hi, this is what I'm worried about. Because our sale fall through the last time because I don't have enough equity and cash. I was just thinking if it's better to have cash on hand than to overpay and have negative equity.

jrawle

hgift7 said:

Hi, this is what I'm worried about. Because our sale fall through the last time because I don't have enough equity and cash. I was just thinking if it's better to have cash on hand than to overpay and have negative equity.

As Mark_d says above, when you are selling, it makes no difference to the amount of equity you have. For example, if you sell for £150k and have £100k of mortgage outstanding and £5k in the bank, you will have £55k equity/deposit for your new house. If you sell for £150k and have £95 of mortgage outstanding as you overpaid the £5k, you will have £55k. The only difference is any cash you need for incidental expenses such as paying estate agents, solicitor, etc.

Hoenir

If you have the cash and the interest rate on the mortgage is greater than your that on your savings. Overpay. Every little bit helps.