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Do you overpay on your mortgage?

(54 Posts)
Fourbyfour Fri 17-Feb-17 15:01:29

If so, by a lot? Is it worth doing or putting into savings instead?
If not, I'm interested to know why not.
We pay the agreed amount only at the moment but wonder if we should overpay somewhat and put slightly less into savings (still putting some into savings of course).
Is even just a £100 extra paid on the mortgage a month worth it?

savagehk Fri 17-Feb-17 15:03:50

How much is your savings earning? How much is your mortgage rate? If your savings earn less than your mortgage, you're better off overpaying (provided no early repayment charges etc). Of course, that depends on you having enough emergency savings to see you through. Also worth checking what your mortgage provider does with overpayments, do they automatically reduce future payments or do they reduce term? Will they keep a 'fund' of overpayments you can possibly call on later?

RedBugMug Fri 17-Feb-17 15:03:52

there are online calculators. have a look and play a bit with sums.

BreezyThursday Fri 17-Feb-17 15:07:46

As long as you have the extra money and the mortgage rate is higher than savings rate it is worthwhile (check how much you can overpay without penalty).
There are some good spreadsheets available online which you can fill in and see how much it will save you/shorten term by in the long run.

minusten Fri 17-Feb-17 15:07:48

It's a tricky question as it really depends on a few factors to determine what would make you better off. These being;

Savings/investment return or interest rate.
Mortgage interest rate
House price increases
Other more expensive debts

However although paying off the mortgage may not be always the most financially beneficial route, for most people owning your house outright and the peace of mind that brings is worth it.

BreezyThursday Fri 17-Feb-17 15:09:47

I should add that whenever we've overpaid (at the beginning of the year for however much we are allowed), we've used it to shorten term rather than reduce payments - which we've had to state quite clearly.
Would rather pay a set amount whilst we can afford it and bring forward being mortgage-free!

Newtssuitcase Fri 17-Feb-17 15:11:21

We overpay significantly on our interest only mortgage. It is definitely worth it particularly if you are a higher rate tax payer paying tax on your savings interest.

Heatherbell1978 Fri 17-Feb-17 15:11:46

With savings rates being as low as they are you're better off paying into your mortgage. We overpay by £500 a month as we figured we're getting little in savings and we do invest in pensions but they're pretty volatile. You should always focus on repaying debt first but good to have access to savings too if you need them. Remember if you overpay you're doing it voluntarily so you can always revert back to the original amount so you're not bound to continue if you need the money for something else.

Newtssuitcase Fri 17-Feb-17 15:12:51

By significantly I mean really significantly. Interest element is about £250 we pay £4k.

Newtssuitcase Fri 17-Feb-17 15:13:19

Heather that isn't always true. We can't get ours back

ThroughThickAndThin01 Fri 17-Feb-17 15:13:21

Yes we do. By £2000 per month. But it's interest only, so we need to pay off the capital (no other repayment vehicle for when it's times up in 2026)

TimTamTerrier Fri 17-Feb-17 15:15:07

We always did, when the interest rates dropped we would keep paying the higher monthly payment. It didn't feel like so much of a hardship when the interest rates went back up as we hadn't go used to the lower rates (this was back in the 1990s when interest rates were not at all stable). We also paid of some of the mortgage if was had extra money, like a work bonus. In the end we had paid it all off about a decade early.

SnoozyCunt Fri 17-Feb-17 15:15:59

We pay a 10% over payment in a lump sum at the end of each year so not regular monthly over payments.

We've just started a new two year fixed period. When the last one came to an end we paid another lump sum off before we remortgaged.

Our interest rate is only 1.99% and savings don't match that so it's worth over paying the mortgage.

Our aim is to have the mortgage paid off six years after we bought the house.

Heatherbell1978 Fri 17-Feb-17 15:16:22

Sorry newt what I meant was you can stop overpaying each month if you like. Not get the capital back you've already paid (though some lenders might let you).

scaryteacher Fri 17-Feb-17 15:20:02

Currently overpaying by £30 per month, as didn't want the payment reduced when the rates dropped. Will be chunking £10k off every so often to reduce the term, but not lower the repayments. We have just under 5 years til the mortgage has gone, so the more we chunk off it, the shorter the term.

namechangedtoday15 Fri 17-Feb-17 15:20:43

No. Our outlook is short term. For us, having been through a critical illness which was made doubly hard by having no savings (as it was excluded from insurance policy as my H had already had the illness before we got together and bought a house) our priority is savings / holidays / home improvements to allow us to have fan family life / make memories.

We can afford mortgage and it will be paid off before we retire. We're not interested in going without (holidays, days out etc) just so we can be mortgage free 5/6/7 years earlier. The children will have left home by then and we'll have lost the opportunity to have a quality family life.

For us, we can't afford to have it all, so our focus is the family at the moment.

wowfudge Fri 17-Feb-17 15:22:20

Well worth doing if you can whilst interest rates are so low.

Conniedescending Fri 17-Feb-17 15:24:48

We do by 150 a month but that's because our rate dropped and we continued to keep to the original payment. We do also have savings we add to and then extra money goes to house renovations

Fourbyfour Fri 17-Feb-17 15:25:49

Really interesting everyone, thanks for your perspectives. Keep them coming!
I will definitely look at the savings v interest equation, and I want to calculate if we overpaid by x a month how many years earlier would we pay off compared to now.
Definitely needs to be a balance with the living for here and now I think.

overmydeadbody Fri 17-Feb-17 15:25:54

Yes we do, by a significant amount, and it has knocked years off.

It is better for us than adding to our savings, we already have enough in savings for contingency.

I think if you can afford it, you should overpay.

user1484830599 Fri 17-Feb-17 15:28:20

Absolutely. That figure on your mortgage paperwork of the capital plus the interest over the term is huge compared to the initial amount of borrowing, and every penny off that is worth it in terms of paying less interest and reducing the term.

DesolateWaist Fri 17-Feb-17 15:28:21

We do as I love the idea of being mortgage free. However I only do this as we have over £10k of savings to fall back on if something went wrong.

savagehk Fri 17-Feb-17 15:29:05

Conversely to those on here, we overpay and have decided to use it to reduce future monthly repayments. The plan being if we suffer a reduction in income for whatever reason we may hopefully still be able to pay the lower monthly repayment. Just means you need to ensure you overpay by a higher amount every time your 'normal' payment is reduced to keep up momentum.

Couchpotato3 Fri 17-Feb-17 15:31:02

We are overpaying each month by a small amount, but it feels like the sensible thing to do. Mortgage interest rates are low at the moment, but who knows what could happen in future. If the rates suddenly shot up, we could potentially be struggling to make the payments, so everything we can pay off now reduces that risk.

FourToTheFloor Fri 17-Feb-17 15:53:18

We do a once yearly overpayment by about 5% of mortgage and then at the end of each term before we remortgage. I think our situation is different in that we don't plan on being in the UK past max 5 years and I'm expecting a correction in house prices so I'd rather have the cash in the bank.

Our mortgage is less than 2 x joint salary so feels very manageable and is less than half per month what our rent was.

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