Paying off mortgage - continue annual overpayments or save for a single lump sum

UndergroundSaxClub

Hi all.

I currently overpay 10% of my mortgage annually, and given a round of "voluntary redundancies, followed by further discussions if we do not meet our targets" at my workplace I'm starting to rethink my current strategy of aggressively overpaying my mortgage, I'm not the best at formatting so please bear with me:

Total cost:	£80,000
Remaining Mortgage:	£37,500
Maximum overpayment (10%) without ERC	£6,200
Early Repayment Charge (for any amount above 10% per annum)	2.5%
Interest Rate	4.04%
Remaining Term	28 years

As a bit of background I originally had a 2 year deal with the initial purchase, overpayed and hit the 60% LTV during this time, and have now locked into a 5 year deal on a 30 year term for the lowest repayments, which I had planned to overpay.

My workplace has started a period of uncertainty with redundancies, followed by what is expected to be a radical shift in the way we function which does leave some questions for the future. Rather than keeping calm and carrying on I'm thinking of revising my strategy and hoarding my annual overpayment into a savings account, contacting my lender once I hit the 40k~ making a single, large overpayment and just eating the 2.5% ERC (£900~).

I am aware I can probably get a better return by saving anyway and letting the mortgage run its course, however paying it off in full is the highest priority for me and I would like to focus on that where possible. For the numbers above I do have a 6 month emergency fund but nothing beyond that.

Hoping some members on here have insight, have also adjusted, or can see any obvious pitfalls I may be about to walk into.

Happy to provide any further information if needed.

Brie

The tipping point is usually the difference between the interest where you have the savings and what you pay on your mortgage. So if your savings account has 5% let it accumulate there, if it's 3% then pay off each month or whenever as long as it's asap but not exceeding the 2.5% limit. That 2.5% penalty is likely to make big overpayments unattractive.

Now £37.5k is not a huge amount. So I'd also consider what you might get from a redundancy payment so that you can better judge how much you really need in savings or whether you can afford overpayments. And then consider again the difference in interest so you are minimising the interest paid on the mortgage and maximising the interest garnered from savings.

Frankly my last redundancy came at the perfect time for me as the redundancy money was enough to pay off the mortgage AND I was able to retire as well if I wanted to. Having the mortgage paid off was a big relief and meant that while I might have continued working full time I was able instead to take an interesting underpaid part time role with a charity instead.

penners324

Why go for a 30 year mortgage? Shrink it 5 or 10.

Then look at a 2 year deal.

Pay ot off after the 2 year deal finishes