Does a long mortgage term matter if you’re saving a good amount?

7sefton

Hi all

Please can someone tell me if I’ve gotten the wrong end of the stick here:

I’ve just refixed my £700k mortgage at 3.89% (Santander product transfer). 

There are 32 years left, and I could
comfortably overpay around £60k lump
sum (currently earning c.5% interest in savings). 

If my savings interest is more than the mortgage rate, it doesn’t matter how long the mortgage term is because I’m earning more than I’m paying. Is that right?

Hoenir

7sefton said:

If my savings interest is more than the mortgage rate, it doesn’t matter how long the mortgage term is because I’m earning more than I’m paying. Is that right?

Yes. On the basis that the savings interest rate factors in any applicable income tax, i.e. is based on the net amount you receive.