Overpaying mortgage

thomp1983

Good morning,

I'm looking for a quick bit of advice re. overpaying a mortgage.

Due to a payrise I find myself in a position to overpay on my mortgage.

I can afford to overpay by £200 a month or £2400pa.

Am I better to overpay each month straight to the mortgage company or put the money in a cash isa for 12 months then pay it off as a lump sum when that matures?

If the figures are needed the mortgage balance is £190k 22 years, 10 months remaining and the interest rate is 4.79%

Our interest rate will drop to 4.21% in may as our fixed is ending in May and that's should be the new switch rate.

Thanks

Chris.

El_Torro

Can you get a better interest rate than 4.79% (or 4.21% from May) in a savings account? Bear in mind that you might have to pay tax on some or all of the interest.

If you can't get a better rate than what you are paying on your mortgage then it's best to pay the £200 a month directly into your mortgage.

RedFraggle

May also be better long term to up your pension contributions than overpay your mortgage so worth considering.

penners324

Pay it into the mortgage

Yorkie1

Compare the savings interest rate with the mortgage interest rate for the pure maths calculation.

But also consider questions such as whether you have a decent emergency fund (at least 3-6 months' expenditure), have your pensions on track for retirement etc. It does not have to be all or nothing into the savings or mortgage.