Mortgage statement came through and it’s depressing reading

[Onedropbeat]

Bought 4 years ago and ideally need to move or extend as there’s now 4 of us in a 2 bed cottage

In the last 12 months we have paid £10200 but the amount that has come off the mortgage after interest has been applied is just £3000

Our interest rate is the best we could get at 1.79%

Earnings aren’t going to increase any time soon because of Covid so it looks like we will be stuck for years before affording to increase the mortgage borrowing

It feels hardly better off than renting at this rate and I’m sad I’m subjecting the children to share for the foreseeable future

But you are better off renting as you’re paying off the capital. The less you owe the lower the interest payments as the capital reduces. How long is the term of your mortgage?

Also, what is it worth vs what you paid for it? How much equity is in there?

It’s got 30 years left on it.
It was 35 when we took it out and we managed to reduce it by just a year last time we moved to a new deal

Due to move to another deal end of this year (had hoped to extend) but will hope to be able to reduce term further

Ideally I want to reduce to a 25 year term but that would put our repayments up by about £250 a month which would be fine but the last year has made me nervous of locking away any money in case something major occurred

If you can overpay by even a small amount it could make a big difference.

@PotteringAlong

Also, what is it worth vs what you paid for it? How much equity is in there?

It’s currently got £100k equity (base on valuation done in 2018 after we refurbished it)

But who knows if that’s gone down since then, and even though it’s equity we can’t borrow more than we already have done

@TeenPlusTwenties

If you can overpay by even a small amount it could make a big difference.

What would be a worthwhile small amount?

Look at the money saving expert calculator for mortgage overpayments. It is surprising how little extra can make a big difference long term. I'm not doing it yet but really shoul.

Have a look at Martin Lewis's Money Saving Expert or whatever it's called. It's got an overpayment calculator which gets a bit addictive (in a good way!)
Also have a think about pensions as well - whilst we've overpaid by a bit over the years every month (and I totally agree with a PP about doing this, even a reasonably small amount chips away over the years) and it's made a noticeable difference, we were told to put some into a pension as you get so much more tax relief on it. I know that's not exactly what you meant but worth thinking about anyway.

@MerryDecembermas cross post!

keep the term but overpay what you can whilst not getting into debt.

anything you can do to extend the house?

Unfortunately at first it is just the interest you are paying off with very little off the capital. The balance does swing the other way but it does take some time.

You'd be surprised what talking to a mortgage broker can achieve, we took out a 35 year deal when we bought our house 5 years ago, we have just remortgaged and have reduced the term to 20 years and the repayments are £100 a month less.

A decent broker will find you the most cost effective deal, and will be able to go through finer details with you.

When we started our latest mortgage, we were given a picture breaking down the payments into interest Vs capital. You pay off mostly interest until nearly the end and then pay off the capital very quickly. I'll see if I can find a similar one.

Look at an offset mortgage with First Direct. Rather than earning interest you can offset it to reduce the interest on your mortgage.

Little amounts do add up over time.

We overpay £100 a month and it really makes a difference.

Like this

Picture didn't post, trying again

Thanks everyone
This gives me hope

Last time we remortgaged we just did it through our existing provider but this time will speak to an independent and see what they can do

@GingerNorthernLass

Look at an offset mortgage with First Direct. Rather than earning interest you can offset it to reduce the interest on your mortgage.

Little amounts do add up over time.

First direct offset rates are ridiculously high. You'd be much better getting a normal mortgage and overpaying.

@redcandlelight

keep the term but overpay what you can whilst not getting into debt.

anything you can do to extend the house?

Yes we could convert the loft or extend out the back but would need to borrow minimum of £40k to do one or the other

I second speaking to a broker. Some are free, some you pay for. We’ve used the same broker for years, charges us £350 but honestly worth every penny. Especially as we are just going through the selling and buying process, it’s been a nightmare for getting a decent mortgage quickly but he’s done it and we’ve certainly made him work for his money this time round

First Direct offset was a good mortgage for us. 1.89% but we have significant amounts of cash in there at times, put aside for tax.

But think of that £40k in terms of how much it would cost you to move - stamp duty, legal fees, removal fees, all the stress and panic of selling and buying.

In the early years you seem to pay interest on the interest. The balance starts to reduce substantially after about ten years. It’s worth looking at even a small overpayment (£50 a month?) just to reduce the interest if you can manage it.

I've been paying mine for a decade and it had been coming down so slowly it's bloody depressing, but then I didn't really have a good look for a year and lo and behold I can suddenly see it reducing more quickly.