Should you overpay your mortgage or invest?
Should you overpay your mortgage or invest?
Are you one of the 1.4 million people whose mortgage deal is coming up for renewal soon? If so, you might be worried about the hit to your income. I understand - as someone who keeps a close eye on interest rates, I know that my mortgage payments will increase too.
One option you might be considering is overpaying your mortgage to reduce the amount you owe and counteract the interest rate increase. This is becoming a popular choice, and some mortgage providers have increased their overpayment limits.
However, you might be wondering whether it's better to save your money elsewhere, where it could earn more interest. Investing might seem like a good option, it is estimated that mortgage rates would need to reach 9% before overpaying your mortgage became more worthwhile than investing*. Of course, this is just one example, and your situation might be different.
Ultimately, whether to overpay your mortgage or invest your spare cash is a personal decision. You may be like many clients and prefer to overpay your mortgage, even though investing might make more financial sense. This is usually because you don't want to have higher monthly repayments when you remortgage, and wish to pay off your mortgage as soon as possible.
So, it's up to you to weigh up the pros and cons and decide what's best for your situation. Remember, your financial adviser can help you make an informed decision based on your individual circumstances.
* Suter, Laura. ‘Client Conundrum: Mortgage Overpayments versus Investments’. Professional Adviser, 22 February 2023. https://www.professionaladviser.com/opinion/4076435/client-conundrum-mortgage-overpayments-versus-investments.
Your home may be repossessed if you do not keep up with your mortgage payments.
