Overpay mortgage or something else?

[JapanRed]

Mortgage fixed for 5 years at 0.99% in Feb this year. Max overpayment without penalty is 10%.

Any spare funds should go into overpaying the mortgage right? We’ve no other debt whatsoever.

[Crafty_]

So, in theory it should be pretty easy to make more than 1% with any extra money, therefore you'd be better off investing and earning (say) 3% then pay a chunk off at 5 years. The only thing is that its risky - who knows whats going to happen next, no guarantee you'll make that 3%.

[UnclePat]

At a mortgage rate of 0.99% it wouldn’t be hard to gain better returns elsewhere on cash savings and pay off a lump in 5 years.

Even Chase offer 1.5% on deposits up to £250,000, or Marcus for similar.

Or for zero risk, £85,000 in Chase etc. (limit of the UK Bank guarantee) and £100,000 in Premium Bonds between a couple at a (albeit not guaranteed) prize fund rate of 1.4%.

There are even higher savings rates available if you lock-away the money for a fixed time or in advance notice accounts.

Yes, hardly a fortune and a bit of extra faff - but the point is, it’s at no or very low risk.

Other options are available of course, but with more risk.

[andy ted]

We are in almost exactly the same situation, currently overpaying about 30% of the monthly payment each month at 0.99% for 4.5ish years (thanks sarnie!) , it feels good to be chipping away at the money owed as got quite a way to go and am quite risk adverse but as savings accounts interest rates are increasing it seems silly not to change to putting the overpayments in to one of those instead (as long as you don’t spend the money!) just need to get my head around it!

[captain.scarlet]

JapanRed said:

Mortgage fixed for 5 years at 0.99% in Feb this year. Max overpayment without penalty is 10%.

Any spare funds should go into overpaying the mortgage right? We’ve no other debt whatsoever.

Have you checked on websites like Moneysavingexpert.com?

There is a very useful tool on there that calculates the effect of mortgage overpayment.

As well also, as with a loan, get a redemption figure so that you know what the current state of play actually is at this moment in time and add it to your records.

[JapanRed]

Thanks all. MSE has a calculator that shows that I need to get at least 1.7% interest in order to beat paying mortgage off (due to us being 40% tax payers). Should easily get that as there’s a few 2 year fixed savings accounts paying >3% interest so just going to do that for now. Should save us approx £500 a year by saving rather than paying mortgage down.