Overpayment or offset savings?

[FessaEst]

DH and I have always overpaid on our mortgage - sometimes only £20/month, but currently about £300/month. We have a mortgage that tracks the base rate with no early repayment penalty, so we have just maintained the amoutn at the level it was at when we took the mortgage on. It also has a linked offset savings account.

As I am about to go off on mat leave for the 2nd time in less than 2 years, I am wondering if we would be better off putting our overpayment £300 into the offset account instead of overpaying, as then we would have access to the money easily if required. DH feels we should be putting everything into the mortgage while the rates stay low. We have a nominal amount of savings in the offset account that don't appear to have impacted much on the mortgage at all - so not sure if there is any real benefit in it?

We do have the suggested "3 months'" worth of savings in ISAs - so this would just be extra. WWYD?

Into the offset account so you can get at it if you want it, up to six months living costs. Then into mortgage repayments.

I think it depends on the relative rates on the products...

I can't see what the advantage is in overpaying the mortgage when you have an offset facility? only that you can't get the overpayments back if you need them, is that right? (we don't have an offset mortgage, so am a bit baffled!)

In our case we don't overpay the mortgage as it's only 1.49% so we're better off putting any spare ££ into the ISAs paying 3%

If you know you're unlikely to need the money there are ISAs that are longer term fixed rates, giving better % rate.

and agree with oldenough, 6 months emergency fund in easy access would be better than 3 months

We're mortgage free now, but never overpaid the mortgage - just saved in a separate savings account which was higher than the mortgage rate (also a tracker). When we had the amount needed to pay the mortgage off in full (plus a little for us in buffer savings) we went into the bank and wrote a cheque to clear it.

Depends how much the mortgage rate is now compared to what you can get in savings interest (take into account tax you may pay). Think you can get around 3%ish in easy access at the moment. Also bear in mind if you are likely to dip into your savings or are you pretty disciplined?

there's no financial difference between overpaying and having the money in an offset savings account with my mortgage - it reduces the interest by exactly the same amount. the difference is that I can always get back the money in the offset savings account in case of emergency whereas it would be a right pain to get back the overpayments. I might also want to carry the mortgage over to our next property and want to borrow from the mortgage facility and use the savings to pay the deposit. so i choose to pay into the offset not the overpayment facility.

Thank you, lots to think about! I need to investigate better ISAs I think.