Ye Olde Regular Saver vs Overpay Mortgage with a twist

KCailey
KCailey Posts: 25 Forumite
in Savings & investments
So my regular saver is coming to an end, £250 for 12months results in £3080.

Then I got thinking.

I have £200 000/20 years left on my mortgage, current interest rate is 1.5%.
If I overpay £250pm, MSE's overpayment calculator says:Overpaying would save you £7,561 in interest alone, and mean you pay the debt off in full 4 years & 7 months earlier.

Would It be better for me to overpay the mortgage £250pm for 15 years
or
Once a year do a lump sum overpayment of £3080 for 15 years?

thank you
«1

Comments

  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    First Anniversary Name Dropper First Post Combo Breaker
    What was the AER on your regular saver?
    Free the dunston one next time too.
  • TCA
    TCA Posts: 1,530 Forumite
    Name Dropper Combo Breaker First Post First Anniversary
    To answer that question you'd need to make some assumptions about what your mortgage interest rate and savings account interest rate would be over the next 15 years.
  • eddyinfreehold
    eddyinfreehold Posts: 213 Forumite
    First Anniversary First Post Combo Breaker
    If you calculate the interest you will pay on your mortgage over the full term then is is utterly depressing. For us it was a no brainer to overpay the mortgage as far as we could every month. We paid a 25 year term off in 11 years by eating away at the capital as fast as possible. Over that time it reaps more benefits than investing money as long as property prices remain stable.
  • PeacefulWaters
    PeacefulWaters Posts: 8,495 Forumite
    If the regular saver pays a higher rate than the mortgage charges you, the utilise the regular saver.

    If the lump sum on maturity can be saved somewhere at a higher rate than the mortgage do that. If not, pay off part of the mortgage.
  • KCailey
    KCailey Posts: 25 Forumite
    kidmugsy wrote: »
    What was the AER on your regular saver?
    5%
    TCA wrote: »
    To answer that question you'd need to make some assumptions about what your mortgage interest rate and savings account interest rate would be over the next 15 years.

    Yes, assume regular saver is 5% and mortgage is 1.5% for the next 15 years.
  • Cardinal-Red
    Cardinal-Red Posts: 664 Forumite
    First Post First Anniversary Combo Breaker
    edited 6 December 2017 at 11:20AM
    KCailey wrote: »
    5%



    Yes, assume regular saver is 5% and mortgage is 1.5% for the next 15 years.

    I'd be careful with this assumption!

    It really is down to personal choice. You need to bear in mind things like whether you are happy to commit the overpayment to the mortgage (once it's overpaid, it's "gone" and you can't withdraw it again in general) as compared to your regular saver which you can fall on should you boiler blow up etc.

    Also remember that a 5% regular saver only really delivers about 2.5% interest over the sum for the whole year. I personally still think 1% is worth it but you might find this changes the way you're looking at it.

    P.S. - What's the twist?
    The above facts belong to everybody; the opinions belong to me; the distinction is yours to draw...
  • atush
    atush Posts: 18,726 Forumite
    Name Dropper First Anniversary First Post
    try Ye Old Pension instead, pay your mtg off with the TFLS.

    Or Ye Old S&S isa. Pay off mtg when rates rise.
  • fiisch
    fiisch Posts: 509 Forumite
    First Anniversary Name Dropper First Post
    Personally, I'd suggest to save in the regular saver (assuming you are actually saving rather than recycling the same £3000).


    If you have no use for the £3080, pay off a lump sum off the mortgage, and start your regular saver up again.


    Sort of what we do (less deductions from the lump for treats/holidays etc.)
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    First Post First Anniversary
    You would gain more by saving in the regular saver and then overpaying with the matured amount, than by using the money to overpay the mortgage each month.

    You pay into the biggest AER % to get the most benefit.
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
    Name Dropper First Post First Anniversary
    Lokolo wrote: »
    You would gain more by saving in the regular saver and then overpaying with the matured amount, than by using the money to overpay the mortgage each month.
    Yes but...the maturity lump sum from the 5% regular saver could be put into current accounts paying 2-3% AER, providing two benefits:

    1. It's still making more than the mortgage is costing, and
    2. It's a useful buffer for emergencies.

    Obviously the time will come when withdrawing all these savings and reducing the mortgage balance might get you onto a better LTV tier when re-mortgaging. Do the sums at the time.
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