mortgage and savings.

[mumcantmakeadecision]

we have about £28,000 in savings. £39,000 mortgage.
the mortgage is in 2 parts, one of 30,000 and one of 9000.
the large bit id up for renewal in March the other is next November.
We are thinking that we make big overpayments, £400 per month, ( which we can do without facing an fees) onto the small one for the next 20 months and clear it before the renewal date. then take the amount we currently pay to it and use that as over payment to the large one and reduce that faster. Is that a sensible idea or should we look at just keeping savings?

We made massive over payments onto our mortgage once we had reasonable savings. I'd certainly over pay one of the mortgages and reduce the money going into savings.
We never compleatly stopped putting money into savings, but did put a significant chunk into the mortgage.

Is there a big difference in interest rates between the two? You may be better over paying the one with the larger interest rate, tho people might be reluctant to remortgage on either of those amounts.

the higher interest is on the bigger one, but thats up for renewal next month, so hopefully we can negotiate a better deal.

Get rid of the big mortgage, keep the small one as that's actually good for your credit rating and makes it easier to get another mortgage if you choose. I had a very low mortgage (lifetime tracker base rate plus 5%) my savings account had a higher rate of interest so I kept adding to saving until I had enough to clear it. If your savings account rate is higher than the interest you pay then have savings but if not clear the mortgage asap.

How much interest are you getting on the savings (after tax) ?

How much interest are you paying on the mortgage?

Its madness to pay interest to a bank if you can avoid it.

In current market almost certainly it makes more financial sense to pay off the mortgage, on the assumption that mortgage charges more interest than you get on savings.

BUT savings are flexible and mortgage much less so. If you pay off the mortgage and then lose a job, roof falls in etc it's harder to get the money back out.

So think about what you can live on for, say 6-12 months if you need to find a new job, set aside a little for emergencies, and overpay with the rest.

Also consider other planned things you might otherwise spend savings on. Would you be looking to move at any point after paying off the mortgage, so might need something set aside for fees? Do you have children who will imminently be at uni? Are you thinking of starting a business and need seed capital? But then the question is much less mortgage v savings as mortgage v whatever other cost. If its savings for savings sake, you just need a buffer.