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would make you more money than you're spending on the extra interest, so even though you'd spend lots on long term interest, you'd earn that plus some more on the investments
Yes. The ‘overpay your mortgage’ is kind of residual advice from when interest rates were 5% and the rest. In low interest rates / significant inflation situations you would do better to invest as there’s a chance you won’t come out poorer.
Howard-
Completely agree there was a time where on average over payment of £50 pm knocked 2 years off your mortgage term, and it doesnt seem too long ago.
That no longer applies in the low interest environment.
Off setting is effectively paying off your mortgage temporarily and as such the return on cash is the mortgage rate which by default is quite poor right now. -
I don't disagree in substance, but this entirely relies on an assumption that the conditions for that equity growth will continue so your investment doesn't plummet.
All you've said about equity markets being inflated due to PE, low interest rates etc could be taken as a reason why overpaying is a safer choice as you're taking a guaranteed return with zero capital risk instead of a hope of an increase (which, if shares are all overvalued right now, might wipe out and also take a chunk of your capital)
wildwest
andyfallsoff
It's a bit flawed.
If you've got the money and you're earmarking it to pay a lump sum later then you may as well overpay as you go. That way you're reducing the interest throughout the term rather than just in chunks every 2/3/5 years.
This assumes you're allowed some overpayments. Most do allow some.
If the mortgage is 1.8% then any way of saving that lump sum and earning more than 1.8% (riskier certainly, but historically not too tough to find) would make you more money than you're spending on the extra interest, so even though you'd spend lots on long term interest, you'd earn that plus some more on the investments.