Archive: MoneySavingExpert's Money Tips Email

Benefits up by 6.7%. Are you missing out on a share of up to £19 BILLION from 21 million unclaimed benefits?
Don't assume 'it's not me'. Even some with higher incomes are due

Benefits were increased by 6.7% last week (some relating to pensions by 8.5%), impacting the incomes of millions of people, including many who are in work. The increase also means some, at the edges of thresholds, will be eligible who weren't before (as you can now earn a higher amount before you lose benefits). As it's estimated millions are missing out on what they're entitled to, it's worth checking.

Try our free 10-minute Benefits Calculator to check if you're missing out

Our quick benefits check-up, built in conjunction with benefits specialists Entitledto, has been updated for the new rates. Just plug your details in and it'll try to make the outrageously complex benefits system as simple as possible - showing if you're likely entitled to one of a range of benefits (and how much you might get)... Universal Credit | Council tax support | Pension Credit | Child Benefit | Housing Benefit | Carer's allowance | Free school meals and more

Last year, think tank Policy in Practice estimated the scale at which people were missing out, and we then added our own info on who can claim each under-claimed benefit. The numbers have likely gone up further since the uprating last week, but we don't have updated figures, so we'll use last year's again below to see if we can help get you what you're due...

'I saved £35,000 & will clear my mortgage 10 YEARS early'
Martin's six Should you overpay your mortgage? need-to-knows

The days of 1% mortgages have passed. This year alone, 1.5m will see their cheap fixes mature, joining millions of others on higher rates. At the same time, years of low-cost mortgages, plus low pandemic expenditure, mean over £100bn of extra savings have been built up. No surprise then that 'should I save or overpay my mortgage?' is a question I'm asked all the time. So assuming you don't have other, more expensive debt (if so, see should I overpay cards & loans?), here are my need-to-knows...

1. If your mortgage rate is higher than you can earn in savings, overpaying adds up. Let me oversimplify a little... £10,000 saved at 4% earns £400 interest (£320 if basic-rate tax is taken off), yet use it to overpay a 6% mortgage and it saves you £600 interest (try our Mortgage Overpay Calc). So using the savings to overpay is a winner - it's a bit like saving, tax-free, at the mortgage rate. Done right, it can be very lucrative, as this success of the week from Paul shows...

2. Yet ensure you're comparing to the HIGHEST savings rates you can get. If your savings pay a paltry 1%, as too many do, unless they're locked away in a fix, it's easy to ditch and switch. You can earn over 5% in both top easy access & fixed savings right now, so unless you're locked in, that's what you should be comparing with.

And while we're on that, it's worth checking your mortgage rate is as low as possible too, use our mortgage best buy comparison and free remortgage guide for step by step help.

3. If it does add up... TWO KEY CHECKS before you do it. It's not solely about the financial mathematics...

1. Are there overpayment penalties? Many lenders let you annually overpay 10% of your mortgage balance penalty-free. Above that there are often penalties, which wipe out any gain, so do check.
   
   
2. Always keep a cash emergency fund. The fact you've overpaid your mortgage doesn't automatically mean if circumstances change and you suddenly can't repay, the lender will say 'oh, no probs' - you'd still be in arrears. So my rule of thumb is always have money to cover 3 to 6 months' bills accessible in savings, and only overpay with any money above that (unless it's a specific offset mortgage).

4. And in some cases where the maths doesn't add up, it may still pay to overpay. If you can save at higher than your mortgage rate, use our Mortgage Overpay vs Savings Calc to see the pound-for-pound difference. If savings are substantially better... SAVE. Yet if they're only trivially better, two things to consider...

• If you borrow over 60% loan to value (LTV, the amount of your home's current value you're borrowing), reducing your mortgage debt may lower the rate of future mortgage deals - see LTV thresholds which improve mortgage rates.
  
  
• This is a long game. Savings may have improved, but savings rates tend to drop faster and further than mortgage rates, so less mortgage debt could be erring on the safe side.

5. When you overpay, do it the right way - put it towards reducing the term. Overpay and a few firms just reduce your future repayments, and keep you paying over the same period. That may help your cash flow later, but it's not where the big saving comes. The real reduction is from shortening the term so there's an interest gain. So when you overpay, ask it to reduce the capital owed and the mortgage term (also see my old decrease term or overpay? blog).

6. Still on a very cheap mortgage rate? Save the right way. If your mortgage rate is still low, then you'll likely be better off in top savings. Yet save now, so the money is accessible when the deal/fix ends, so it can then be used to reduce the borrowing if needed. You could use fixed savings that mature just before you need the cash.

PS: I've focused on overpaying vs saving. There is of course also overpaying vs investing, yet that's impossible to give any definites on as it's comparing a certain outcome with an uncertain one (& investing's outside my wheelhouse).