Would you overpay mortgage by this much in this economic climate?

[firesuntea]

I’m rubbish with this sort of stuff but not sure if overpaying is a good idea when the market may crash next year? Usual payment is 550, could afford to pay 800. Grateful for any advice!

It depends on the circumstances. I'd focus on having a healthy savings pot first and paying off all other debt that's more expensive eg credit cards/overdraft etc. But a market crash (personally I don't think this will happen) won't change the amount you owe, so I would definitely overpay once the above commitments had been met.

We can only overpay by up to 10% so do check if you are able to pay that much. Market crash shouldn't affect an existing mortgage and will mean when your term ends you won't need to take out as much. That might be a good time to pay off any additional savings.

Thanks very helpful!

Only have about 12k savings so that was part of my thought process, should I save more or put into mortgage

If you want to top up savings them persally I'd probably go 50-50 with the extra money and overpay £125 and save £125 a month

Stock market crashing shouldn’t have any bearing on your personal decision whether to overpay or not.

Is your job safe and your income stable?
Do you have any other debts to pay off?
Do you have easily accessible savings in case you needed them to pay living expenses for a few months?
Do you save enough into a pension?

Only overpay if you don’t need the extra cash for any of the above.

@NoSquirrels just 12k savings and pay into pension though could pay more technically.

Job is secure at the moment. God knows about the future!

In theory it’s not a good idea to pay off your mortgage when rates are so low that the debt is cheap to service...you would be better off putting the £250pcm in your pension or at least in A stocks and shares ISA. Psychologically though it’s hard to resist trying to pay off the massive debt! The market crashing won’t change the amount you borrowed unfortunately - you’re still definitely on the hook for that so if you only had a small deposit overpaying might be the thing that keeps you out of negative equity.

Figure out how much 4 months living expenses is - we’d be OK on £12K, so I’d personally up my pension contribution and then shove a small overpayment into the mortgage. Our mortgage allows us to use those overpayments first as a payment holiday, so basically functions as an extra safeguard to the cash savings for living costs.

Interest rates are really low and likely to stay that way for ages. So actually a S&S ISA is a good idea to start right now, weirdly - if you can save over the longer term. But pension will definitely be the best immediate return on your money because of the government tax relief.

But yes - what mysteryfairy says about equity. We have a low LTV so we won’t be in negative equity and don’t expect to move house anytime in the next 10 years. But if you have a high LTV and might need to move or remortgage and negative equity would be an issue, then being able to prevent that would be useful.

Thanks this is all very helpful! Stocks and shares isa..I will have to look this up!

When we were overpaying our mortgage a few years back, we could access any overpayment. So when we wanted to do some work to the house, we used that to fund it. It actually didn’t affect out monthly payment either as that was set at overpayment level. But that mortgage was unlimited overpayment. Current mortgage is only 10% a year.

@EssexGurl what does that mean then, you can get it back anytime? For any reason?

Being mortgage free is however more secure in insecure times. Job loss or change is not so drastic if your home is paid off.

For our mortgage at the time, yes. For the life of the mortgage we could overpay an unlimited amount and borrow back the overpaid money at any time. The rate was higher than if we’d borrowed through a bank but was easy and flexible for us. As it was unlimited overpayments, every time we overpaid we kept the monthly payment at the higher amount. So we overpaid a lump sum then Overpaid a smaller amount each month. So the mortgage got paid off quicker. Tbh mortgages now typically just do the 10% overpayment a year. But it worked for us.

I’m risk averse so overpaying the mortgage was a priority and being able to access the funds if needed was a bonus. We only did it once but it was simple. Worth checking out you mortgage terms.