What to overpay and what to save?

JMC39

Hi,

I'm hoping some of you MSE'rs will be able to give me some advice on what you think I should be doing with my spare monthly income.

Generally, my GF and I are fairly free of debt, however we do have a car loan and a mortgage. Our current situation is this:

Average spare capital per £500 - £700 (although there may be months where this could be £0)
Savings: £3500 - however this is due to pay for a kitchen

OS Mortgage Balance: £89,000 with 24 years remaining at a fixed rate of 5.490% until 31/12/2008. Currently my monthly payments are £549.71 (Capital and Interest). After 31/12/2008 the mortgage returns to Halifax's SVR. On this mortgage I can make early payments of upto 10% of the outstanding balance per year within any charges.

Car Loan Outstanding Balance: Around £6368.40 with 21 payments of £303.24 remaining. This is was a fixed rate loan of £10,000 at 5.9% over 3 years. This loan does have an early settlement fee of £524.14 per £1000 borrowed if repayed halfway through to the loan, or £267.75/£1000, three quarters of the way through.

My question is, what do people think I should do with my spare capital? Personally I would love to be mortgage free, and currently I think overpayments are my best option? I don't think it would be worth me overpaying on the car due to the charges and obviously the other option is to save the money.

Thanks for your help!

CLAPTON

just a comment about the car loan
the half way figure of 524.14 per 1000 is NOT an settlement fee but is telling you how much capital you still owe them (plus up to two month interest)..reread the T&Cs.
Also note that a settlement is NOT the same as overpaying... which will have different T&Cs or may not be allowed.

JMC39

CLAPTON wrote: »

just a comment about the car loan
the half way figure of 524.14 per 1000 is NOT an settlement fee but is telling you how much capital you still owe them (plus up to two month interest)..reread the T&Cs.
Also note that a settlement is NOT the same as overpaying... which will have different T&Cs or may not be allowed.

Sorry, yes you are correct. I have just spoken to A&L about this and they have said that I cannot make overpayments on the loan - if I want to pay the loan off I must do so as a lump sum, therefore there is no benefit in doing this. Looks like it's a choice of overpaying on the mortgage or saving the money.

red74

I know December is a long way off in terms of the economy but the way things are with the mortgage market at the moment I would definitely be tempted to get rid of as much of the mortgage as possible before the fixed rate ends. The more equity you have in the house the easier it should be to get a better rate when remortgaging.