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Overpay and remortgage or keep low rate??


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Appreciate its difficult to answer but looking for advice on whether to overpay my mortgage or wait. 

Currently on a rate of 1.14%, monthly payment £751, got 9 months left of a two year fix, with a further 15 years to go to complete my mortgage. Current balance is £130,557, house is worth roughly £385,000, original value was £310,000. 

Been lucky enough to have been able to overpayment my mortgage for the first couple of years until my salary dropped to the point I couldn’t comfortably overpay, however, now I’ve suddenly come in to £100,000 and now have to decide whether to:

1-  switch early, pay the £100k towards the mortgage, along with the ERC of £789, and start a new 5/10yr fixed deal at around 5%

2- overpay my permitted OP of £29,100 and continue to pay my £751 until next year then remortgage and hope the rates haven’t increased too much (doubt they will come down) 

With my current deal ending in less than 12 months I can’t lock in the money in to a “high” interest fixed account. 

Does it make more sense to pay the mortgage at 1.14% for as long as possible then over pay, or overpay but then start a new mortgage at a much higher rate but much lower balance? 

Any advice or opinions gratefully appreciated, thanks.

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In simple terms, you can get more than 1.14% in easy access accounts at the moment, so would make more sense to put it into savings accounts until your current deal ends.

Mortgage rates are high at the moment, especially for fixed rates, so although the base rate may go up, you may not get a better deal now. Although that's something you'll only know for definite in retrospect.

Also, consider inflation. Not the cost of electricity etc but your salary - if it's going up by more than 1.14%, the amount you owe us going down in real terms so why pay it sooner?

There's then lots more to consider that's difficult to put into a response (and not expecting you to put personal details on here in response), but have you got an emergency fund, have your got any investments etc. You've mentioned a previous change in circumstances but if it happened again, would you rather have £100k in savings/investments or only £30k left on a mortgage but that the bank world still expect repaying regularly with money you may not have?

Paying down a mortgage is something most people look to do, but don't put yourself in a position where you have no other savings for the short term but also think long term with pensions ISAs etc

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Agree with Dino, keep the low rate for now, but overpay whatever you can afford when this comes to renew, because the mortgage interest rate you will pay on the otherside will be much greater than what any savings rates will pay.

What you should look at though is an Offset account. That is a mortgage where theres a savings account next to it. Any balance in the savings is mortgage you are not paying interest on. If your mortgage is 6%, then thats equivelent to a 6% savings account (better actually as you dont pay tax). Whilst the money sits there doing nothing you effectively have a £30k mortgage, but should you need it, its yours to spend (with a corresponding increase in interest of course) anytime you want.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker & BTL Specialist

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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