Many homeowners are facing a decision of whether they should pay off portions of their mortgage to reduce their monthly repayments, overpay to reduce the mortgage term, or save their money to take advantage of the attractive interest rates.

If you’re coming off a fixed-rate deal, you could be facing an increase in your monthly mortgage payments due to the rise in interest rates. Making a lump sum payment before starting a new deal could lower your repayments and, by reducing the term, you would save interest over the lifetime of the mortgage, too.

Better rates may also be secured on a new fixed-rate deal if the property’s loan-to-value (LTV) is less.

Another option is to save your money, which could be an attractive option given the potential higher rate of return on savings accounts currently. However, it is useful to bear in mind the tax on the interest, especially if you are a higher-rate tax earner, as this will reduce the amount you make in interest overall.

You might also want to consider the risks associated with trying to generate interest from higher-return investments as the risks may outweigh the overpayment option. It is therefore advisable to speak to an independent financial advisor before proceeding.

It is advisable to keep some money in savings in case of any emergency, giving you peace of mind in case anything unexpected happens in the future. It is also worthwhile clearing credit cards or loans first, avoiding any high interest charges on any expensive debts that have been accrued. 

If, after everything, you still can’t make your mind up…