Should I over-pay tracker?

[picturehouse]

I have a tracker at ECB+1.15% with Ulster Bank. There's about 240k outstanding.

Monthly payments are e790 and I could easily afford to increase this to say 1.2k. Is it worth doing this?
My thoughts in favour of doing it is that I may move in the future and lose the tracker rate (after 5yrs @ ECB+2.25%), so I'd be better off paying off more capital between now and then in order to reduce the interest burden when I move to variable.

Or is it better to keep repayments the same, and put extra money into savings where the interest rate is higher than what I'm paying on the tracker, and use savings to pay a lump sum off the mortgage if and when I move to variable?

 

[DB74]

My own personal opinion would be to save the extra money instead of over-paying the mortgage.

The lump-sum you save could be used to pay down the mortgage at a later date if you decide to move (as you mentioned) and you may also get a deal with UB if you pay off a lump sum, similar to the 10% extra deal that PTSB gave a while back.

You could also use the lump sum as a deposit on the new property and it also is evidence of regular savings in case you decide to get the new mortgage with a different bank.

The arguments against saving the money would be mainly that the cost of the interest on your mortgage is more than the interest earned in the savings a/c. You would need to run the figures but with a tracker of ECB+1.15% it is unlikely that the loss (if any) would be significant enough to really push you towards paying the mortgage. Also you may not actually save much in interest by paying off the mortgage early. You would need to check UB's T&C on this.

The other con against saving the money would have been that your savings were at risk vis-a-vis the bank guarantee but that risk seems to have passed at this stage. 3-4 years ago this argument would have held more sway so you can probably ignore it now TBH but just to make you aware of it.

 

[michaelm]

Or is it better to keep repayments the same, and put extra money into savings where the interest rate is higher than what I'm paying on the tracker, and use savings to pay a lump sum off the mortgage if and when I move to variable?

When you consider DIRT it probably makes little difference either way. Having it in savings may prove handy should you need it unexpectedly but, conversely, you might be tempted to spend it unwisely.

 

[niceoneted]

If you are planning on moving in the future I would save the difference.
It will show evidence of savings to bank when looking for mortgage.
It will mean a bigger deposit and therefore less of mortgage amount needed which after 5 years will o to variable rate thus costing more.
Although there is little in the difference of what you'd earn in interest and pay in interest now I'd be looking at long term.

 

[Brendan Burgess]

This is discussed at length elsewhere and there is no need for a new thread.