Do you over pay on your mortgage?

[worrywilma]

I've just done a calculation and if we overpay on our mortgage, around £500pm between us, we would save around £70k in interest and knock 15 years off!

We're home bodies so don't go out very often, but we do like the odd treat of new clothes and holiday once a year, but it's doable if we put our mind to it.

I'm very undecided on whether this would be a good idea or whether that money could/should be used elsewhere.

I really like the idea of being mortgage free before 50 but my weird brain also thinks "you should live a little!"

First world problems I know, but after a stint of homelessness and literally no more than 20p in my pocket, having a roof over my head that can't be taken away is very appealing.

We're not at the moment as our mortgage is 2% but it's up in 2027 and we'll hopefully be able to pay a chunk off then!

I did, it sort of snowballed and became an obsession - I paid the whole thing off when I was 48. I really enjoyed watching it go down 😂😂

Yep we do. I was advised many moons ago to look into Karl Jeacles calculator when determining our mortgage. Based on this we pay bi weekly instead of monthly (this saved 24K alone in interest). We overpay but not to exclusion of everything else. So we do additional pensions, some general savings and investments and also overpay. We’ve paid some lump sums €5/10K here ahd there from bonuses and also aim to try and pay €200-400 extra each month. Based on that we’re on track to pay our mortgage off approx 8 years early. No idea on interest saving though

No. We put as much as we can in our pensions and isas. So far that's worked out very well financially. Definitely better than overpaying as we've mainly been on very low interest rates.

It depends on size of mortgage as you can't overpay more than 10% on mine. We overpay £350 a month.

Yes, I stared this a couple of years ago. Overpaying £200 pm on mortgage of £140k. I chose the option to reduce the term. Considering adding another £100. Would add this is not to the detriment of going on holidays/eating out/nice gym membership

I’ve started overpaying £10 a month on my mortgage each month. I’ve noticed the reduction of interest already. Just wish I could overpay more!

We overpaid ours but not to the exclusion of having no extra treats or days out. It was just finding the right balance.

No. Any money we don't mind being locked away goes in our pensions because no other savings can beat not paying 40% tax. We are in our 50s, have a mortgage we can easily pay, and have plenty of cash savings. You might have different priorities.

No I paid extra into pensions to get the tax relief and then cleared my mortgage with some of the 25% lump sum I received.

I overpay 25 quid a month. And try and pay the rest of my 10% allowance if I can. I used to overpay more but inheritance has meant we only owe 24k now and so our 10% is quite low.

Even a small amount makes a difference. The MSE overpayment calculator is a great tool.

We overpaid and paid our mortgage off in 15 years rather than 25. But not at the expense of going on holiday. I'd choose a cheaper holiday but no go without entirely.

Yes we overpay by around £150 a month and it really does make a huge difference overall to how many years we have left on the mortgage. I was surprised how much it helps. We also did a lump sum overpayment when out terms were up after first 5 years.

Same. Our thinking is max out pensions and ISAs first. Ensure emergency fund. Only then would we overpay mortgage. But to get to the point would take a lot of money.

Ideally you should have six months money as a float. I was made redundant during covid and it took 7 months to find another role. Can you live on £10k for six months.

Yes, I used to overpay my mortgage pre-dc.

We considered doing this or formally shortening the term when renewing this time, we have 11 years left but could afford to shorten it to 9 or 7 fairly easily. We decided not to, just going to add to savings over the next 5 years, with a savings account that is roughly the same rate, then we have the freedom to either pay off a chunk at the next break and then have only a couple of years left, or use the money if we need it or spend on holidays if we prefer.

@worrywilma Its a balance, as pp have said you may be able to grow the £500 in other ways.

Personally I paid my mortgage off in 13 years, but that was a while ago. The good thing is once it’s paid off not only can you save the £500 but also the mortgage payment so your savings then grow quickly.

The 4.5% interest for me would be why I would be reducing the mortgage. The more capital repayment the less interest you accrue.

I started by saying it’s a balance, If I had £500 a month I would do £300 off the mortgage, £100 into savings and £100 for fun/holidays/treats. For you the ratio might be different.

I know not everyone gets a pay rise but my approach was month 1 enjoy the extra net income month 2 increase mortgage payments by 50-60% of net monthly income increase.

We overpay by £600 a month. This takes 11 years off and will save us just over £200K (based on our current fixed term rate).

We’re not going without to do it, though. I wouldn’t be willing to do that.

The obsession with being mortgage free isn't financially savvy.

Put the 500 into a stocks and shares ISA, where you can also withdraw anytime. The one I invest in has a long term average annual growth rate of almost 15pc. After 5 years you would have 45k if that continues. After 15 years it's almost 340k. Tax free.

Mortgage interest rates have risen, but investment returns are almost always higher interest in the long term, so I would keep the mortgage and let the money pot grow.

We haven’t yet but we will make a lump sum payment before it’s due for renewal.

Make sure you have six months' of compulsory outgoings in an emergency fund. Then, if I were in your position, I'd up my direct debit by £300, but then transfer in anything else that's left at the end of the month. That way you can have the odd treat, but when you don't you can put in the £500.

I think it depends on your interest rate

I would overpay at a rate of 4.5%. We overpaid a bit for years our rate is 1.5%. We built a good buffer. When interest rates went up we actually stopped paying the mortgage and used the previous over payments to fund the mortgage. We then put what would have been mortgage payment into high interest saving accounts at 5%. We are saving like mad as we can have it paid off next summer when our current mortgage fixed rate ends. I am so excited. ) You still should live and I think have a bit more of an emergency fund

I have always overpaid, even if it was to round up the standing order to the nearest £25 or £50.

In the first few years of my 30 year mortgage I was able to then knock off 5 years from the term. Following five years I overpaid by average £100-150 a month which knocked another 7 years off. An inheritance knocked a good chunk off but with overpayments I hope to finish my mortgage this year.

You can play with the numbers on a number of online calculators, and it really depends on if you want to invest in your mortgage or balance savings rates instead.

But like you op, 15 years ago I literally had the contents of a borrowed car to my name and a very messy divorce. I'm so liberated by knowing that by Christmas I'll be mortgage-free.

Yes I have. I intend to pay it off before my current fixed deal ends in four years time.

It's not like it's a compulsory payment. If you have an unexpected expense like a car bill, home repair, want a holiday then you just knock it back down to it's original amount for a couple of months.

I think we adapt to spend the money we have often with not a huge amount to show for it.

If overpaying still leaves enough for a reasonable life then go for it.

If it's too tight then knock it down to £400. You'll only really know how comfortable it is once you start and you are not forced to continue forevermore so I don't see you have much to lose.