Q:

How to represent mortgage overpayments in household budget

I keep a household budget spreadsheet, one tab of which represents our savings. 
Some of our savings is in traditional savings vehicles (ISAs etc.), but some of it has been used to overpay the mortgage. 
Our mortgage permits us to make overpayments, while keeping our monthly payments the same; the overpayments are deducted from the capital balance owing and have the effect of reducing the term of the mortgage. The overpayments can be withdrawn at any time but this would extend the term of the mortgage back towards its original date.
I can't work out whether it makes sense to include these overpayments in the total of our savings or not. They currently form part of our emergency money in that they are liquid and could be used if we were hit with some large unforeseen event. But, at the time that the mortgage reaches term (in about 11 years from now), the money effectively evaporates and will no longer be available for withdrawal as it has been used to pay off the mortgage.
Am I being unwise to include this in the "Savings" category, and how else should I represent it if not as "Savings"?
At present we have about 1 year's income in savings but about 1/3 of this is in the mortgage overpayments, which are reducing the term by about 6 years (from Jan 2032 to March 2026). (Given how poor savings rates are at the moment, it's very tempting to put more towards the mortgage as well...)

A:

I would represent it as "Savings" for now, as it is available for withdrawal and will be for quite a while. I'm in the same position and I take that approach.
But you need to keep a close eye as the mortgage approaches term and make an explicit decision at that point whether you want to pay off the mortgage then or keep it going. If you do want to keep the mortgage going obviously you'd need to withdraw the overpayment in time.
If you do decide to pay off the mortgage then at that point make an explicit transfer from "Savings" to "Mortgage".
The downside of this approach is that it does require explicit action from you to preserve it as savings. If you think this might get missed you could make up another category for it instead. In the end this is all about influencing how you think about it, so there's no unambiguously right answer.
EDIT:
Since your mortgage is with Nationwide, you also have the option of asking them to reduce the monthly payments rather than the term when you make an overpayment. If you actually want to retain the same rate of monthly payments, you can then top up your normal monthly payments with an overpayment for the difference.
This does rely on your mortgage product having unlimited overpayments - fixed-rate products often limit overpayments for the term of the fixed-rate.
Also if you make the same payments, you'll logically still reach a zero balance on the mortgage early. However, with the original term unchanged, as you approach zero, the normal monthly payments will also diminish to zero. So if you make sure the overpayments stop before you hit zero, you should be able to keep the mortgage going for the rest of the term with a very small balance.
It will also complicate the accounting: as the mortgage advances, the "overpayment reserve" should naturally drop to reflect the payments you should have been making, though  it looks to me like Nationwide don't actually reflect that in the "Current total overpayment" they show in the mortgage statement online. I think you can handle that by making a notional transfer from "Savings" to "Mortgage" every month to make up the difference between the payment actually made and the payment you would have made on the original amortisation schedule. In any month where you actually pay more than the required payment, that difference is an increase in your "Savings".

A:

The same as you would account for any debt repayment.
It's balance sheet neutral. You owed, say $1000, and had $1000 in savings. Both are now gone. 
In my opinion, it's a good thing, but that money will not always be available to you. Even with the provision allowing withdrawals, I imagine your withdrawals are limited to a maximum balance based on the original amortization, in other words there is a maximum mortgage balance the declines as what a normal mortgage anything below that can be withdrawn. Correct? 

