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Save or over pay mortgage?

(15 Posts)
Pipbin Fri 20-May-16 07:39:31

For the last few years I have been paying off a loan at £300 a month. This has now been cleared and I'm finding that I could manage perfectly happily without it.
So I'm thinking that I should either save that money or over pay the mortgage.
I already manage to save about £500 a month and have a reasonable pot of savings already, certainly enough to cover unexpected bills etc.

I know that the interest rate on savings right now is tiny but what would be gained from paying that extra off?
My mortgage has about 15 years left to run and I owe about £100,000 (I think).

ThroughThickAndThin01 Fri 20-May-16 07:43:15

If you already have savings, I'd overpay the mortgage. Although check with your mortgage company how much you can overpay by, some have restrictions.

CarpeJugulum Fri 20-May-16 07:45:23

My mortgage does allow overpayments (up to £xxx amount), but keeps it in a reserve which I can then draw back if required (although with a delay of about 2-3 weeks to get the actual funds) - might be worth checking if yours does the same? Then you can overpay, but still have an emergency cushion.

MewlingQuim Fri 20-May-16 07:51:14

When I was in your situation I was advised to overpay the mortgage. I did, and now it's payed off. I would recommend doing the same if you can, it takes so many worries away. For example, my job is a bit shaky at the moment and I'm thinking "oh well" rather than "oh fuck oh fuck oh fuck" smile

FIS2016 Fri 20-May-16 07:53:52

Definitely overpay mortgage if you have enough savings for emergencies. The interest you will save will be great. Every thing you pay in will be directly going to the equity in your house not interest. This will reduce the overall interest you have to pay as you mortgage will be paid off sooner.

PurpleDaisies Fri 20-May-16 07:54:09

If you've got a cushion of savings for a rainy day definitely overpay. The interest rates won't stay low forever and you could knock years off your mortgage. We're currently 8 years ahead of schedule on a 25yesr mortgage (although we're about to buy a new house and start again!). You've also got extra equity if you move.

sooperdooper Fri 20-May-16 07:57:26

Another vote for overpay the mortgage - in the unlikely event (since you have savings) that you did need access to a lump sum you could also remortgage

jessplussomeonenew Fri 20-May-16 08:03:18

The Moneysavingexpert website has a handy calculator where you can work out how much you save by making overpayments (can be huge sums!) and what interest rate you'd need to get to be better off saving.

BeatricePotter Fri 20-May-16 08:03:20

I would overpay the mortgage.

Advice from Money Saving Expert here;-

www.moneysavingexpert.com/mortgages/mortgages-vs-savings

InTheSandPit Fri 20-May-16 08:13:13

I'd add to your savings until you have 3-6 months of living expenses saved up. Once you have that, put as much of it as your mortgage will allow onto the mortgage. The difference it make to the years you will need to pay in amazing (make sure it goes to reducing the term, not monthly repayment)

Tigresswoods Fri 20-May-16 08:23:39

Mortgage!!!! One day you'll look back & be:

A) amazed how low interest rates were

B) pleased you took advantage of that.

BarbaraofSeville Fri 20-May-16 09:21:29

Voice of dissent. What is the interest rate on your mortgage? How financially disciplined are you? Do you foresee any major purchases that you might want to borrow for (extension, new car etc).

The interest rate on our mortgage is less than 1% for the life of the loan. You can easily get 3-5% interest tax free on a variety of interest paying current accounts, so if you are in this situation and can trust yourself not to waste the extra money, save it instead. If interest rates change so you can't beat your mortgage interest rate with savings, simply pay a lump sum, or whatever you are allowed without penalty off the mortgage using the savings.

This also has the added advantage of the money being available if you need it to fund a major purchase whereas if you paid off the mortgage, you couldn't get it back without going through a remortgage application.

One disadvantage would be that the savings would count against you if you ever needed to claim benefits but if you have a mortgage you wouldn't be entitled to housing benefit and if you have a working partner, you are unlikely to be entitled to income support or whatever it is called these days anyway. And child tax credits aren't affected by savings.

Pipbin Sat 21-May-16 14:29:26

Thank you for the advice.
The savings we have are enough to live on for about 6 months should everything go to compete shit.
I think I'll contact the mortgage company and find out what they say. My only worry about over paying is that I can't really get the money back.
However, we don't (and can't) have DC so we aren't going to be needing to pay for college, weddings, extensions or giving children money for a house of their own. So getting the mortgage paid off a year or so earlier would be great.

Fluffycloudland77 Mon 23-May-16 21:04:18

I over pay £30 a month, it knocks a year off my mortgage at 2.68%.

Fluffycloudland77 Mon 23-May-16 21:06:53

Just run your figures through the mse overpayment calculator, assumed 2.5%, it knocks 5 years off.

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