To think that overpaying your mortgage can actually be quite risky?

[MarianneVos]

Lots of advice on here and elsewhere to overpay as much as possible/get rid of your mortgage as early as you can etc.

But is this really wise? Even when it comes with a caveat of having stuff month's outgoings saved or similar, once that money's gone to your mortgage company it's very hard to get back, and with everything rising so much, six month's expenses or even salary could be gone through quite quickly, if one person lost their job and took a long time to get another, or if big house repairs were suddenly needed (perhaps new boiler/roof etc).

Yes you save a lot in interest and reduce the term, but not having to pay a monthly mortgage in several years time isn't much of a comfort if you end up struggling in the shorter term?

How much of a cushion in savings is actually needed to make overpaying make sense?

Should overpaying a mortgage be as much a priority as people suggest?

Has anyone overpaid and then been made redundant or similar and regretted it?

Six month's outgoings not stuff months!

At the end of the day whatever happens with house prices you’ll still owe less money so can’t see that’s a bad thing

if it’s for years on end though at the cost of never doing things that you enjoy though then imo not worth it

Depends on your attitude to debt. I hate being in debt so made an effort to pay mine off as soon as I could. It wasn’t instant but I paid it off 12 years early. I also felt being in credit was a cushion in case I couldn’t pay it one month and I also took out redundancy insurance

YANBU. Cash (flow) is king, especially in a recession. We'll be making an overpayment this month or January but one that's sensible for us. Enough to make a dent in the mortgage yet still psychologically feel good, and to leave us with a good chunk of savings in the bank.

Over paying on a lower rate before re-mortgaging will save quite a lot - just make sure there is enough savings just in case

We overpay ours by £500 a month and started doing so just before Covid hit.
Absolutely no regrets whatsoever, we knew it would be about a 5 year plan and it was achievable taking into account the lifestyle we choose to live.
We 100% wouldn’t have done it if it had meant compromising on our day to day life, losing holidays, weekends away, nights out, no takeaways etc. It’s very personal though, I know people who are living exactly like this in order to be mortgage free quicker - literally forgoing everything I get pleasure from life in.
I just think life is too short and we could die next week, I’d rather have lived and enjoyed life along the way.

Maybe when interest rates eventually start coming down, carry on paying the higher rate if you can. That’s how I started

I know what you mean. A friend and I were discussing this yesterday.

For many I suppose, it’s the psychological impact of being mortgage-free and knowing that whatever happens, your house can’t be lost via repossession.

We overpaid and never had much of cushion, we just made A few small changes.

When a mortgage rate came to an end, we took another but slightly reduced the term. When we got a pay rise, we upped the payments by half the pay rise. Finally we rounded it up, so a mortgage payment of say £675 would be rounded to a straight £700.

small changes paid a 25 year mortgage off in 18.

Offset mortgages are a good solution to this dilemma. You can keep many thousands of pounds in a linked account, functioning exactly as it you'd used it to pay down your mortgage: you're not paying interest on that amount.

But you still have the flexibility to draw on that cash if you need it. This was especially useful for us since DH was self-employed so his income was unpredictable and we needed a large cushion.

Quite often with mortgages if you overpay you can underpay in the future. I can remember when Dh was made redundant working out that if we needed to we could go over a year without paying our mortgage. Which was very nice.

We had an offset mortgage so access to the overpayment at any time.

At the end of the day it's about balance, having enough to put into accessible savings and also overpaying. We were over paying £500/month and were looking to get a 20 year mortgage done in 12. However with costs going up we have had to bring that down to £300.

It only makes sense if you have a really decent amount Of savings to cover emergencies / loss or reduction in earning. It also made more sense when interest rates were so low it worked out better to overpay. We’ve overpaid £50-£100 a month the last couple of years

Of course paying down a debt makes sense. It was a very good move for me.

It's the endless dilemma op.
I've read up lots about it.
If you put that money into a higher interest savings account you could pay down mortgage+ more when you can.

Overall it depends on risks and security. We try and do both, chip away at it and save.

@Mumoftwoinprimary , I put in 1 year's worth of overpayment for just this reason - I inherited a little bit from sale of mum's house when she died. If the worst happens I want a cushion of a year to sort things out.

We are with first direct and can't do this ,get breaks when we have op but...we seems to be able to op what we want

We have set up a standing order to pay an extra €250 per week into our mortgage account, we let it build up to about 10k before then paying it off, if at any time we needed that money we can take it out up until the time we decide to pay it off iykwim. We have saved ourselves tens of thousands in interest so far by doing this. We can thankfully still afford to live as we like.

The thing is, in 4 year's we don't know where interest rates will be.

So what we are paying off now will cost us twice or three times as much in 4 year's and we won't be able to over pay. So surely little chips off make sense now?

As long as you have a safety net? Short term pain v long term gain?

Surely it depends on the rest of your cash flow?
For us, way back when as interest rates started dropping, we overpaid to the same monthly payment as we initially took the mortgage out for. So no impact on our monthly budget, as we were used to paying at that level, but it has hammered through our mortgage and put us in a pretty enviable position in our mid 40s.
Would I be over paying in a market of rising interest rates if we'd bought 5 years ago? Given interest rates and cost of living, no probably not.
I don't think it's as clear cut as "never a good idea".

There is nothing like getting rid of that enormous debt a bit sooner and even a relatively modest overpayment can have a real impact on the number of years you will be paying it for. And what a relief when it's all done!

That said, investing into your pension is possibly a better investment, especially for higher earners.

And yes, if all your spare cash is in the mortgage, what happens if you have a crisis. I had an offset mortgage in the end because of this and was able to take back funds when needed.

Most people do both, so it’s hardly risky.

It's not an either/or one-off decision. If you can afford to overpay, great. If that changes, stop overpaying.

Even when I was building up savings I overpaid the mortgage a bit.

It’s a very personal choice. I recently started overpaying ours by a small amount each month because I know we are both pretty undisciplined with money and if we have it, we’ll spend it. But if it’s gone at the start of the month then we won’t miss it, if you see what I mean. If you know you can be really strict about saving and not be tempted to ever dip into your savings for something non-essential then I’m sure building up a really good chunk of savings is just as good a use of your extra money, if not better, and will still be helpful when you come to remortgaging.

We do make sure we have a solid ‘cushion’ as well and I’d never overpay if I didn’t think we could afford it but I personally would rather chip away at the debt a little bit wherever I can, rather than frittering that money away (which I know I would!)