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On the MSE “is it worth overpaying calculator” it says I need to earn 3.4% interest (before tax) with my 2.69% mortgage.
Note that with new tax rules introduced this year you will probably find that the first £1,000 or £500 of savings income is not taxed at all so that might bring your 3.4% figure down to 2.69% although do make sure you're comparing like for like in terms of interest rates - sometimes the mortgage rate is given non-compounded.
Tax rules explained here: https://www.gov.uk/apply-tax-free-interest-on-savings/how-much-tax-you-pay
rhowe
So a bit of a long one after doing a fair bit of research on MSE.
I’m planning on overpaying on the mortgage but trying to work out whether it’s worth saving first to make the most of my money (and try and rebuild some savings).
On the MSE “is it worth overpaying calculator” it says I need to earn 3.4% interest (before tax) with my 2.69% mortgage.
There is a TSB account @ 5% up to £2k and a First Direct @ 6% (but only accumulable at £300p/m with £3,600 total).
Neither of these are wild figures, but what I wanted to sound out was whether it is worth using up both of those obvious routes before overpaying?
my logic is it will give me a practical emergency buffer while “beating” overpayments ( 5% > 3.4%).
in the short term this is binary, but in the medium term it isn't. So I can over pay in a year or two.
Just on the saving being better value, does that all stack up? (Creating a buffer obviously has its own benefits).
Cheers.
NB. Overpayments are permanent and can’t be offset/redeemed etc.