Confused - what is the right answer - overpay or not?

Notsurehowtodoit

Hello All
I have a mortgage deal that expires in March 2026. At that time I could pay off the outstanding amount (retirement lump sum).
However, before then I have the chance to make overpayments for 2025 and the first 3 months of 2026. 
I had thought that this was a definite good thing to do - to reduce the term and hence the interest paid over the term of the mortgage, but have now been advised that I am wasting my cash on overpayments if I intend to pay off the total so soon.
Is this correct ? Can anyone explain why overpayments would not be benefiical in this case?

Thankyou!

Mark_d

In my opinion overpayments are rarely beneficial.  Mortgage is a cheap form of borrowing and the money you can make by saving/investing the cash is more than the interest you'd save by making overpayments.

LadyWithAPlan

I think many on here would argue peace of mind and feeling of focus is worth a small % taking into account risk etc and many use the small goals of OP, or Tilly tidying to keep the focus on becoming debt/mortgage free 

Importantly do you pay interest tax on your savings? As if BR tax payer then you only get £1k interest tax free then pay your tax rate … HR you only get £500 interest free before being taxed  at 40% … 

The maths is easy to work out, if your mortgage is 1.5% and current savings rates 5% it’s worth looking at - taking tax paid on interest income into account .. but if it’s 4&4 then just get it paid down - owning every blade of your grass is a place of peace, and from there you can make great new life decisions 

obviously first 20k per annum can be put in an isa -so tax free -  cash isa as I would not be putting into a S&S isa given you need to cash it out in 18 months 
 - what you can get (after tax) on your savings 
vs what you saving on the mortgage 
if it’s pretty flat then I’d keep a 3 -6 month EF 
 And get rest paid down off mortgage - be careful to not incur any early repayment fees 

Newbie_John

Numbers needed.
Interest rate of your mortgage, interest rate on your savings, potentially salary tax bracket.
How much mortgage you have left?
What's your overpayment allowance?

But if your mortgage is £50k at 1.5% and you have £50k in ISA that gives you 5% then it's not worth overpaying, yes you'd pay 1.5% interest less, but you won't also earn 5%.

But if your mortgage rate is higher 3.2% and you pay 20% tax on your 4% savings then it's becoming equal. Although one could say you have a free loan just in case needed.

If you overpay too much you can be charged extra for exceeding your allowance so better check with bank the limits.

Notsurehowtodoit

Thankyou for your responses. The mortgage rate is 4.89%, and the amount outstanding in March 2026 will be £191K - thats if I make the 10% overpayment of £24K during 2025.

So the first question from the replies you have given is ... can I do better with my £24K than using it to pay off some of the mortgage debt? 
And second, can I do better with the £191K than paying off the mortgage when my deal is up? 

Both answers depend on me finding a savings account that will pay me over 4.89%. I won't be paying any tax on any interest earned on savings as far as I can calculate.

I think I have clarity!

Though what about the interest I won't pay on the overall mortgage borrowing if I pay the £24K overpayment in 2026 - won't I also be reducing the overall amount of interest that I will pay altogether?

Not sure about the clarity ...