Best overpayment tactic

wanderlove

Hello,

I'm hoping for some help. I'm on a mission to pay off my mortgage asap. I have used the MSE calculators, have looked at my income/ outgoings and have settled upon overpayments averaging at £900 per month, allowing me to be mortgage free in 6 years. 

I am aware of the 10% overpayment limit (currently £8533 for 2024). My question is; do I make the maximum monthly overpayments and then top of the remainder in-between terms, OR do I not make any monthly overpayments and instead put the money into regular savings accounts and then pay in-between terms? I understand that my fixed deal calculates interest daily, so I'm wondering whether shaving off interest bit by bit is best.

My mortgage interest 4.84%

Savings accounts
x2 1 yr Reg Saver 5.5% MAX £250pm 
x1 1yr Reg Saver 7% MAX 300pm

Thank you

South_coast

A regular saver will earn you interest on the balance daily, so you often find you end up with less than you think at the end - eg you won't earn £252 if you max out the £300/month one at 7%, as you'll only have £3600 in it for one month. 

What's the early repayment charge if you exceed the 10% limit? With your interest at 4.84%, you may find the ERC is lower and you'd be better off just continuing to overpay beyond the limit

wanderlove

This is interesting, thank you.

From what I can see; The ERC is calculated as 1% of the amount repaid early, above any annual overpayment allowance, for each remaining year of the period during which the ERC applies, reducing on a daily basis

Archerychick

Think I’d probably be creating a spreadsheet to see what each option nets out at. All our over payment is going into savings until the end of our fix rate because it’s earning more interest that way. We can overpay whatever we want but the interest on savings is way higher for us. 

As the person above says you may find that you’re better to overpay, but a spreadsheet would help you to plot that through