Save or pay off mortgage?

[AWiseWomanOnceSaidFuckThisShit]

I save X amount each month, thankfully job is secure. I have over 6 months wages saved up so quite a bit but not a fortune. Plenty for a rainy day. If I sell my house in the next couple of years any profit I make on it will be put straight into a deposit for the next house... should I carry on bulking up the savings (fuck all interest on savings account) or throw more at the mortgage, cutting out lots of interest? Advice? Am I missing anything? If I move I don't know what the options are re either porting or remortgaging and whether this will affect anything?

I would definitely overpay a bit on the mortgage. It can add up very quickly and you won't get interest on savings. Our mortgage advisor said to us recently too that with the mortgage package we have chosen anyway, should we overpay and then get made redundant/go on furlough/part time or whatever and need to take a mortgage holiday we can take one unpenalised until the overpayment is used up. So it is almost as handy as savings as a cushion but with the added bonus of reducing the amount you would pay on a mortgage long term.

So you can take it out again you mean?

Can you now split any excess cash - half to savings and half onto the mortgage.
So, say you are typically saving £200 a month, instead of pushing it all to savings, put 100 to savings and 100 overpay the mortgage.

We overpaid the mortgage for a while (we committed to taking it out, then interest rates just fell and fell so we kept paying the original amount), and it has allowed us to pay off the house much younger than many of our peer group.

Yep that's what I'm doing. 30% to overpayment account and 70% to savings. Everytime the overpayment account hits £1k I throw it at the mortgage, it's such a buzz! I just like the idea of putting a lump sum into the mortgage too... but of course once it's in there it's gone! But if it'll all be put towards house no 2 anyway it's cool?

It really depends on whether you will ever want or need a loan off of the bank at any point in the future? If you have savings (even if they earn you nothing) it's better than having to get a personal loan iyswim? There's no point in ploughing it all into your mortgage as you can't get it out easily with fees/interest. I would only pay extra on my mortgage once I had a good account buffer 1-2k in my current account and a savings account with 5-7k available. But that's just my thinking.

You just need to be a little clearer what you’re saving for? Is it just for moving up the ladder? Even if you have 100k equity in your house, but only need 70k deposit for the next one, you’ll be able to get the remaining 30k as cash. You don’t need to use all the money for a deposit.

In terms of saving, the interest rates are very poor so even most of your rainy day money would be better off in a stocks and shares ISA. In case of financial difficulties, you can still pay it out in about 48h or less.

If you’re just generally saving, you might want to work out some goals like when you want to retire and look at pensions and LISAs etc.

The next goal is most definitely a bigger house, the full equity will be probably more than 3/4 of the deposit. I'm saving for this and putting other money aside for general emergencies etc but my main goal is housey no 2

Do you have a pension? I’d prioritise that over paying down a low interest mortgage.

If moving house is a priority and likely to happen quite soon, I’d just overpay the mortgage. You’ll use the equity for deposit or you could get cash out if needed for a refurb etc.

I would always have at least 6 months salary in cash in case you lose your job or get sick etc.

Anything over you can use to pay down

Yes I have a pension, house is a priority though and hopefully can happen in the next year or two. Once I'm in my "forever" home I'll up my pension contributions

Are them any limits on the amount you can over pay? When you calculate how much interest you save on this amount it makes it a very attractive use of your savings

Yes there are annual limits but I won't be touching those. It is very attractive indeed. If I pay off £1k I save almost double that in interest!