Overpay or Save

dirk_

Afternoon all.

I am looking for some mortgage advice.

We moved into a new property end of last year and have been funneling extra money into it since and have so far managed to pay 14% of the overall debt.

We are paying double the required monthly fee.

My question is, is this the best option for our money.

Our remaining mortgage amount is just under £200k at a rate of 4.46% fixed for another 13 months.

We are hoping to get rid of this mortgage by 2030/2031.

But the question is, am I best saving the extra overpayment and waiting for a better rate 🤔 when I remortgage and firing in as much as possouble before taking next fixed rate or carry on doing what I am doing at the moment.

The extra we are paying doesn't affect our month to month living overly so that is not a consideration.

Thanks

Brie

The mortgage you have to remortgage the more likely you are to get that at a good rate.  And the more you pay now the less the interest will be every single month in the future.  

You say it doesn't affect your living "overly".  Well do make sure you have a little bit for fun. 

And, almost more importantly, make sure you aren't making false economies like not paying into a work pension so you can pay off the mortgage quicker.  Missing out on your employers' contributions to your pension could be a big loss to you in the future.

El_Torro

Can you get a better interest rate than 4.46% after tax in savings accounts? If not then it makes more sense to overpay your mortgage than save the money. 

As Brie mentions investing, especially in a pension, is also a very powerful tool to put yourself into a better financial position. If you want to pay off the mortgage quickly then fine, just don't do it at the expense of all else.

dirk_

Thanks to both for the replies.

We both have Employer contributed pensions, we both pay around 8% in to this.

Cant find a decent savings account that would allow us to save the amount we want at a decent rate.

The remaining mortgage amount is £199k, paying in £3500 per month (over pay by £1650) the plan was to get rid of this mortage within 5/6 years and then fire the same amount into either a pension or savings.

My wife is worried about lumpjng it all into a pension as neither her mother or father survived to see much of theirs.

saajan_12

At those numbers, it makes little difference. 
* Paying down the mortgage is a guaranteed 4.46% saving, free of tax. 
* Other high interest savings account are also essentially guaranteed x% but you may have to pay tax depending on your band and x% is likely pretty close to 4.46% anyway. 
* Other investments come with higher risks but usually a higher return. Entirely up to you which your priority is. If it was say a diversified all world tracker stock portfolio, I'd personally treat it was marginally better than a guaranteed 4.46% saving but not by much. 

dirk_ said:

But the question is, am I best saving the extra overpayment and waiting for a better rate 🤔 when I remortgage and firing in as much as possouble before taking next fixed rate or carry on doing what I am doing at the moment.

The extra we are paying doesn't affect our month to month living overly so that is not a consideration.

Thanks

Don't get your logic here.. whether you save the money outside and pay a lump sum later or overpay each month doesnt' affect your ability to get a better rate later. After the fixed term you can do whatever you want including getting a bigger mortgage (thus extracting your overpayments made to date) or getting a smaller mortgage (thus requiring you pay in a lump sum just before). 

dirk_

saajan_12 said:

At those numbers, it makes little difference. 
* Paying down the mortgage is a guaranteed 4.46% saving, free of tax. 
* Other high interest savings account are also essentially guaranteed x% but you may have to pay tax depending on your band and x% is likely pretty close to 4.46% anyway. 
* Other investments come with higher risks but usually a higher return. Entirely up to you which your priority is. If it was say a diversified all world tracker stock portfolio, I'd personally treat it was marginally better than a guaranteed 4.46% saving but not by much. 

dirk_ said:

But the question is, am I best saving the extra overpayment and waiting for a better rate 🤔 when I remortgage and firing in as much as possouble before taking next fixed rate or carry on doing what I am doing at the moment.

The extra we are paying doesn't affect our month to month living overly so that is not a consideration.

Thanks

Don't get your logic here.. whether you save the money outside and pay a lump sum later or overpay each month doesnt' affect your ability to get a better rate later. After the fixed term you can do whatever you want including getting a bigger mortgage (thus extracting your overpayments made to date) or getting a smaller mortgage (thus requiring you pay in a lump sum just before). 

Thanks for your reply.

You are correct on your final paragraph, I am not sure what I was thinking here.