Who has paid chunks off their mortgage? Was it worth it?

[TwoCoffeesandAMilkshake]

(Numbers are not accurate, but demonstrate the reality).

We don’t have many savings due to a job/ house move that was needed due to covid. We owe (for example) £80 000 over 22 years (did it like this to keep repayments low). If we stick to the plan, we'll pay back £130 000. This means £50 000 worth of interest. Now that I have seen the stark figures, I can’t imagine paying that much interest.

I have savings of £8000 - saved for some work that needs doing and I don’t want to get a loan. Would I be mad to pay off £5000 and then try to save again. I imagine saving £5000 (in case of emergency), then paying this lump off the mortgage. It would mean a limited safety net of savings.

I've paid £4k extra this year on top of normal repayments

We have about £105k remaining and about £200k equity

We have about 16 months left on a low rate and we're allowed to pay about another £15k extra until then. I'm determined to do it as I want to mitigate being completely ripped off at renewal

We are overpaying ours, 8 1/2 years to go, currently have a 5 year fixed rate & hoping to have it nearly paid when 5 years is up.

We paid off the mortgage by monthly overpayment (£300 pcm). We also paid extra chunks when we could. I hate owing money and made paying it off a high priority. I had an offset mortgage so I had easy access to offset savings. We became mortgage free in our 40's

However, I would keep 8k as a buffer without an offset.

We’ve overpaid ours in chunks a few times when we’ve had the money (making sure it goes to shorten the term rather than reducing the monthly amount) but I have six-month worth of salary saved which I keep for an emergency.

It’s not actually equivalent to my salary but it’s what I know I could live off if I needed to (bills, mortgage, and job seeking - 10k). I’ve been through redundancy consultations more than once, and used to have redundancy insurance but I don’t any more. The savings make me feel safe.

Is it really a 'huge mystery' to you that not everyone has sufficient spare money to pay their mortgage off so quickly?

Plus many people have low rate fixes that mean that paying off their mortgage would cost them a lot of money because they would get more interest by saving the money themselves. A lot of people have mortgages costing 1-2% and savings pays up to 7%.

The OP 'only' has £8k in savings <insert obligatory disclaimer about her hugely fortunate position as most people are completely skint> so in any case ot would be best to keep this back as an emergency fund and it shouldn't cost them anything to do this if its kept in an account paying a decent amount of interest.

As others have said, pay additional off each month. I over paid and it meant I was able to move early as I had more equity in my old house. Definitely worth it

We're with first direct and overpaid for years - they have unlimited overpayments. I really loved seeing the numbers come down and checking the money saving expert calculator for how much we've saved. I also knew that if anything did happen we would be able to adjust our payments so they were much lower as a result of our overpayments, which means that we're in the position to take some unexpected unpaid leave which has turned out to be necessary.

Now it doesn't make sense for us with the savings rates, so the money that we would have been using on the mortgage is going into savings and the intention is to chuck it at the mortgage when our fixed term runs out. I do miss seeing the mortgage drop though, and it's much easier to dip into savings! I also think it's easier for us to budget for the unpaid leave by thinking we're just not overpaying the mortgage rather than we're burning through savings, but I might be weird on that front.

I had a chunk paid off by a relative. It helped massively as it allowed me to work part-time when the kids were younger.

Now I'm getting divorced it's a nightmare as I now have to buy my ex out by a larger chunk

Something similar- I Had an endowment shortfall when it come to paying mine off, I now owe just under £5000 on the loan I took out to cover the shortfall and have just under 5 years to pay it.
Every day, when I check my various bank accounts, I take any pennies and pay them into the loan account, eg, if my account is at £342.67, the 67p goes into the account. I have only been doing this for a couple of months and have already am almost at finishing the loan a month early. It works out that roughly every 85p reduces the loan by about £1.
I think I will probably end up paying it off about four to six months early and I won't have noticed those payments at all.

We paid the 10% annual overpayment for a couple of years in our last house when our mortgage interest was 1.94% and savings interest were 1.5% it helped with huge equity when we moved.

Now our mortgage interest is 0.99% for another 4 years and savings are 3.1 and 4.25% interest it doesn't make sense to overpay but to see until the fixed period is up and then pay a big lump sum.

Those who talk about weekly payments, apologies for asking what might be a silly question but how does this work? Say your monthly mortgage payment is £1000pcm. Do you simply pay £250pw? What happens when the 1st comes around? Or do you change payment due dates with the lender?

I'm interested in this, because I'm fairly sure that that (while it absolutely would reduce the term overall) wouldn't make a years and years of difference in terms of the timelines for repayment.

I'd be interested to see the maths of how much difference it makes. If anyone has the calculations that would be great, otherwise I'll try and write them up today and return to the thread later.

(thinking about it, I guess a chunk of the difference because you pay 52 1/4 of your monthly payment (so an extra 1/12th a year) instead of 52 monthly payment*12/52 (the same amount per year, difference then only in the timing of when you pay it off).

Definitely, having no mortgage is absolute freedom

We paid ours off when a lump sum came our way. Accountant said not to, because there was still tax relief on the interest then, but we paid it off anyway. We found it reassuring to know that, whatever the future might bring, the house was ours.

Years ago my mortgage could be paid every 2weeks and if you did this is was the equivalent of making 13 monthly repayments over the year. By doing this it reduced the mortgage term by about 7 years.
If I was in your situation I would not overpay with the relatively small amount of savings you have, you might need them in case of redundancy or if you have unexpected expenses.
I would be critical of your spending and reduce this to allow you to make some overpayment through the year, possibly see if there is a better mortgage product available from your current lender or other institution.
See if there are any offset products where the interest accrued in an account held alongside the mortgage is also used to reduce the lump sum owed.
I would be more bothered about your pension cover than the mortgage.

This was our reasoning too, all money went onto the mortgage if you need to you at least have an asset you own outright. You have to weigh up the risks etc, but also pmce your mortgage is paid off its much easier to save as well. It worked out for us, I would always do my best to pay off a mortgage to avoid the interest which just seems like dead money

We over paid every month and mortgage was reduced from 25yrs to 16yrs

You can over pay 10% whether monthly or 10% of year payouts

See when and how interest is calculated to whether pay monthly or once a year to get the best out of over payments

Is it really a 'huge mystery' to you that not everyone has sufficient spare money to pay their mortgage off so quickly?

Its a mystery to me why people say they've got a 30 year mortgage etc, don't people remortgage? We've always got a good deal (less so most recently unfortunately) and after 2/3 years switched to the next good deal during which time We've also overpaid, the value has increased so we borrow less each time, better deals because the loan to value percentage is bigger. Occasionally paying off a chunk when we've wanted to borrow a bit less than the outstanding balance. The result of which is well be mortgage free at 45 instead of 65/whatever.

I agree OP.

I would keep the 8k as a nest egg, because it's good to have some ready cash in case of emergencies, and think about overpayments going forward. How much roughly each month would you have available to overpay and what's your interest rate?

We've done this - bonuses etc all went on paying off chunks in £5-10k lots. Then when I married DH I sold my house and paid off the rest of his. But £8k is not a lot of a buffer, I'd maybe use £3k as an overpayment instead.

I’ve contacted my bank (HSBC) to ask about making weekly payments and was told “it’s just not something we do”. Does anyone have experience of a UK bank which does allow weekly payments?

I really dont understand this obsession with paying off your mortgage - its the best deal you can get in terms of interest paid, even if interest rates increase. As long as you can afford the monthly payments theres no need to worry about the

It is far better to put the money into a stock and shares ISA and you then have the money there if you need it for emergency/ spending purposes. You can save up to £20,000 each tax year. Buy a managed fund and you will be getting 10% return a year and wont need to actively manage it. You have access to the money at any point - not instant access but usually within 3/4 working days - and can use it for what you want.

All UK mortgages calculate interest daily, so there's no benefit in paying weekly vs monthly on it's own. It's just any overpayments that you benefit from (subject to your mortgage interest rate being higher than available savings rates, many aren't).

You can pay off any extra amount you want, regularly at a frequency of your choosing, or as and when. Either way, just send the money to your mortgage account. Just be mindful of any penalties for overpayment, although I've seen some banks recently increasing the annual allowance from the standard 10% of the balance, to 20%, which should be more than enough for most people.

While I agree that people on here are weirdly obssessed with overpaying mortgages when it often doesn't make financial sense, you're wrong about the rest due to investment risk making it a bad idea to rely on this money in an emergency (if you need it when the market is down, you could lose a lot of money).

It's also not the case that managed funds will return 10% per year. Most managed runs don't even match index trackers, and most people would be much better off using index trackers for most or all of their investments.