My feed
Premium

Please
or
to access all these features

AIBU?

to want to make mortgage overpayments

94 replies

Nickpan · 06/03/2019 11:58

or AIBU to myself to confess to not understanding any of it?

OP posts:
Report
Nickpan · 06/03/2019 13:17

Who on earth is telling you that you should blow the equity on your house on holidays and cars?


While I'm 'young'!

OP posts:
Report
ChocolateChipMuffin2016 · 06/03/2019 13:18

We have been looking at this, the reality is that we haven't been able to do much but have made a few very small over payments in the last year (less than £100) BUT we have a one year old and another on the way so very little money spare.
For us the priority is a savings buffer (so 6 months expenses), then pay down the mortgage and then over pay into our pensions. My parents have always been crap with money so I don't want to be like them financially, but it is hard with a young family and huge expenses.
Like others have said though, its basically so we can reduce the term and pay less interest overall.

Report
Moanger · 06/03/2019 13:19

We’ve been overpaying whatever we can afford and are hoping to pay it off in the next couple of years. We bought the house in 2005 and we also had to do quite a bit of work to it. We’ve got reduced payments and have access to the overpayments if we really need the money back. We stayed on variable after our fixed term ended so we aren’t limited with what we overpay but I probably wouldn’t have if we were owing a larger amount.

Report
Murinae · 06/03/2019 13:22

We have always had mortgages with free overpayments and have always overpaid and have now been mortgage free for about three years. It says you a lot of money in interest payments and gives you a great sense of security when your house belongs to you and not the bank!

Report
Chewbecca · 06/03/2019 13:25

We overpay and increase the overpayments every time we get a payrise, before getting used to having the extra cash.

If you have other debt at a higher rate, you have to pay those off first.
You should also make sure you've got sufficient emergency cash savings.
Then finally, when you have spare cash, you basically have 3 choices

  • spend it
  • save it at a higher interest rate than your mortgage is (with a view to repaying the mortgage at a future date)
  • pay it off the mortgage
Report
StormTreader · 06/03/2019 13:30

Honestly it's about striking a balance - I've always saved and overpaid but now I'm nearly 40 I do look back at all the holidays and trips my friends had and think "I kind of wish I'd given myself a little more fun money back then".

Report
LoubyLou1234 · 06/03/2019 13:35

We over pay £100 on top of a £370 monthly payment. I want to eventually round this to £500 but currently doing work on the house. By overpaying I aim to only be paying for 15 years max. We got a mortgage in our late 30s so ideally want it done by 55 at the very latest.

We also save a little ( rates aren't great) and are both in local government and NHS Pensions is it makes sense for us to do so. Plus we save money in interest!

Report
ScatteredMama82 · 06/03/2019 13:42

Definitely overpay if you can. Most mortgage deals will allow you to overpay 10% of the balance per calendar year. If you have spare cash, there's little point in saving at the moment as interest rates are so low so it's better used to reduce your debt. We try to have a savings 'buffer' for emergencies, we keep it at set level and then use any extra to overpay. If we have to use the savings (e.g. for a new boiler or something) then we top them up to the level and then start overpaying again.

Report
Lightsabre · 06/03/2019 13:42

How much in emergency savings did you have before over paying please? I'd like to do this but it's also difficult to save 6 months salaries/ 6 months outgoings.

Report
Dimsumlosesum · 06/03/2019 13:44

We live simply and massively overpay each month.

Report
Jaxhog · 06/03/2019 13:51

No brainer, with saving interest rates so low. But pay off all other debts first, and make sure you have a little bit for emergencies.

Report
ScatteredMama82 · 06/03/2019 13:58

@Lightsabre we aim to have £10000 in readily accessible savings before overpaying

Report
Nickpan · 06/03/2019 14:01

well, just made a phone call to 'up' my direct debit, which will save me £130K in 21 years time :)

Although that mortgage will end in a couple of years time, so not sure how that will affect things. If it's £2000 to remortgage, I'm just treading water!

OP posts:
Report
Missingstreetlife · 06/03/2019 14:07

Pay off any other debt first. Mortgage is cheapest way to borrow. Once money is in equity you can't easily get at it so have savings in case you need them urgently, new boiler, roof, car or redundancy. Is your pension ok? Any large expenses likely?
Then decide if you can make more by investing if you have the nerve.
If not overpay what you can, you may be able to borrow on it or downsize later.

Report
TheTitOfTheIceberg · 06/03/2019 14:08

I've recently been temporarily promoted which is making a difference of about £225 a month in wages. I've chosen to overpay the mortgage by £100 pcm, put an extra £100 in the savings account and keep the £25-odd as fun money. I don't quite have the equivalent of 6 months in savings - more like 4, but rising slowly - but I wanted to build up a buffer with the mortgage company. If I can keep paying the £100 beyond the term of my temp promotion, I'll pay off my mortgage 4.5 years earlier than originally scheduled which could be the difference between me being able to take early retirement or not. For me it's a no-brainer.

Report
teainthemorning · 06/03/2019 14:11

Being debt free means no-one 'owns' you. It means not being enslaved to lenders.

Report
Poloshot · 06/03/2019 14:22

Over pay (check if there's a limit annually as to how much) and they might write to you reducing payments. Tell them you want the payments to remain the same and the overpayments to come off the amount owed so the term reduces.

Report
Maryann1975 · 06/03/2019 14:28

Definitely over pay if you have spare cash, although I am in the minority in my friendship groups to do this. We have a bit in savings (not loads, but enough that we are happy) and will feel far more secure once the mortgage is done. It will mean we can choose to take lower paid/lower stress jobs if we wish as our mortgage is ur biggest outlay each month, once it’s gone we can afford to earn less money each month.

Report
PettyContractor · 06/03/2019 14:51

For example, we are on a 1.99% mortgage, so if we overpay some of it, we get an instant benefit of 1.99%. However, our other investments are averaging ~7/8% a year, so we plough everything we can in to these and when we come to the end of our mortgage fixed term in 4 years we can overpay in one lump sum having made far more money with the higher interest/dividends.

That's a valid thing to do, but it's not necessarily better, for everyone. Some people won't want to take the risk of having less money in four years time.

(A random web page I just googled gives a historical range of equity average annual returns over 5-year periods as -2% to +28%.)

Report
ShavenConnery · 06/03/2019 15:04

With a bit of shopping around it is possible to get fixed-term bonds with a better rate than a fixed rate mortgage - although it depends on your LTV and term length. So it can make financial sense to put into a bond instead of overpay.

But realistically you're only looking at < £100 over 5 years - so the real advantage is you get to choose what you do with the savings at the end of the fixed term.

Report
Lardlizard · 06/03/2019 15:08

How on earth could this not be a good thing to do

Report
EssexGurl · 06/03/2019 15:14

We had a mortgage that allowed us to make unlimited repayments. We kept the monthly sum the same after any repayments. So we repaid a chunk and each month were reducing the amount owed. We did borrow some back when we did work on the house, and our repayments didn’t go up because the overpayment was so high.
We were both working in the City at the time, so had nice bonuses.

However, we’ve got a BTL mortgage that only allows 10% repayment each year. Not so as flexible.

But overall. If you can afford it I r think it is a great idea.

Report

Don’t want to miss threads like this?

Weekly

Sign up to our weekly round up and get all the best threads sent straight to your inbox!

Log in to update your newsletter preferences.

You've subscribed!

LaurieFairyCake · 06/03/2019 15:16

This thread has just coincided with a few free hours for me (been meaning to do this since Christmas!) where I've phoned and arranged to overpay £800 a month !

I've just reduced my mortgage to 13 years Smile

That mortgage overpayment calculator is amazing

to want to make mortgage overpayments
Report
CountessVonBoobs · 06/03/2019 16:21

It's one thing to remortgage to access an investment or asset which will appreciate, e.g. to buy another investment property outright or get the seed capital for a business. Or even out of desperation in a short term financial crisis of some kind. But to trash your equity for something totally fungible like a holiday, or that starts depreciating instantly like a car, strikes me as one of the dumbest things you could do financially.

It's a good idea to give yourself a bit of "fun money" like a PP said rather than live nose to the grindstone and plough everything into the mortgage. But you know what is really, really fun? Having massive freedom to choose your work, travel, or not work at all because you own your home outright.

Report
DrWhy · 06/03/2019 20:12

I always used to overpay the mortgage but now having a decent amount to invest we have a financial advisor. As a PP mentioned our IFA is confident that he can on average get a return significantly better than current interest rates (around 3% even after fees and tax on a low risk income generating investment, more comes with more risk). This leaves the lump sum we have available for any emergencies, redundancy etc.
It sounds logical but of course the IFA makes money if we invest with him, not if we pay off the mortgage! So since we have a year until our fixed term is up we will invest for the year then reassess return and interest rates then and make a decision about whether we pay a lump off or invest again.

Report
Please create an account

To comment on this thread you need to create a Mumsnet account.