Over paying Mortgages

[Aquarius1234]

AIBU to find those that over pay their mortgages smug?
Moat people can just about afford or want to pay the standard monthly payments. Let alone want to use any more money/ savings on it !!
Why worry about paying off when in 20 years your probably get some form of lump sum anyway

If interest rates drop, you pay less each month. If you are prepared to keep paying the same amount each month, you can pay off the amount owed in a shorter period.

If you are also prepared to have a higher monthly payment, the time needed to repay is even shorter.

The above describes what @Cafog says she’s done. I’m not sure where you got a lump sum being required from her specifically saying why a lump sum wasn’t needed.

Regular overpayments do the same - the difference is that you can stop overpayments if your circumstances change. However, some mortgages don’t allow overpayments at all and most limit how much can be overpaid so it can be better to shorten the term and have a higher fixed payment.

@Youngishone

Could you clarify "it also reduces the chances of someone stealing your house please

First direct allows you to over pay as much as you want

This is where someone pretends to be the owner and ‘sells’ the house out from under the actual owner. It’s easier without a mortgage as it means there is no oversight from the mortgage company and the fraudsters have fewer documents to intercept / forge.

It’s very, very rare and putting an alert on your own address with the land registry offers much the same protection (basically if someone starts doing searches against your house when you aren’t selling it, it’s time to worry).

@mmoossee @TBOM

Absolutely but the info must come from properly trained people. My uncle teaches and said he had done some classes, telling students all investing is risky gambling, isa must be locked away for years and so on.

Uncle is least investing money savvy person I know.

To address the lump sum issue - many endowment mortgages had an option where a mandatory life insurance policy paid out a fixed sum during the term if you died, and also at the end of the term if you didn't. So the life insurance pays for the capital repayment.

They were more expensive than just life cover alone, and after the endowment mortgage mis-selling scandals they got withdrawn by most lenders, and they were never quite as popular as other products so it's not surprising that people don't know about them. I actually have one - committed to pay £70 / month to the life insurance company for 25 years and will get £30k in a couple of years' time. I actually overpaid the mortgage it was linked with long ago ... so this lump sum is basically free money.

Absolutely but the info must come from properly trained people. My uncle teaches and said he had done some classes, telling students all investing is risky gambling, isa must be locked away for years and so on

Crikey, that's a bit concerning. In an effort to give something back. I run money management and investing courses for teenagers. It's really rewarding (on the whole!) and I hope some of those skills will help them make good financial decisions in life.

I think part of the issue is the preconception that financial matters are too hard and complex for most people to understand. Teenagers tend to have more confidence and they've produced some excellent analysis of shares and worked out income tax calculations, the best mortgage deals etc.

Joining in the land of smug. 14 years early. Still in the first house we bought when we got married, our income has more than tripled since we bought though so we were able to massively overpay. Saved more than £110k in interest by doing so and have complete security that no matter what happens in the future we don't have to worry about our home.

I work in banking. There has been an uptick in fraud related to selling properties with mortgages with fake conveyancing companies.!The impact to the owner is the same - they lose their property & have to wait for a refund. But that refund comes from the bank rather than than Land Registry and so it takes longer.

I think it's just that some people including me value financial security above all else. A mortgage is a debt. The recent interest rate chaos hasn't been pleasant, imagine just not needing to worry about any of that.

Yiiiiiiiikes

Back in the early 90's a sibling took out an endowment mortgage on their first property. Was going on about suckers who take on repayment mortgages when they'll have enough to pay off the capital PLUS a massive amount of £££ as well..... .

I pointed out that it was a gamble on the endowment portfolio being as golden as projected and they sneered at me.

I refrained from commenting when years later they realised the full extent of the shortfall, they nearly went under and of course had to take out a repayment mortgage.

They lost thousands and thousands compared to what they would have paid under a repayment mortgage in the first place.

I can't believe all the mortgage horror stories on here. We booked a consultation / review of our mortgage with our provider and they gave us a full health check including our projected end date based on our monthly payments including any overpayments and also whether there were any more advantageous offers available compared to our variable rate. All free advice and really well communicated.

Why do these people make such disastrous clueless and inept financial decisions when this information is available through the mortgage provider is beyond me. It's in the bank's best interests to ensure their customers can afford their payment.

Surely this is the other way round? You pay less interest so save hundreds if not thousands, you're giving the bank LESS money if you over pay!

It's only smug if they bang on about it surely

I do blame banks for this.

Last time we remortgaged, all they were trying to sell us was low monthly repayments. The info we really cared about was how much we would take off the debt over the years of the term. Our objective was to pay off the debt (because the less years you're paying it and the quicker you bring the debt down, the less you end up paying overall) but they didn't want to give us the info to choose the mortgage product based on that. All they wanted to tell us was we could pay £50 less per month.

We were fine, we did a big spreadsheet with compound interest calcs and stuck a load of different scenarios in, but this seems to me a key bit of info we should have been given.

OP the point of the overpayment is every £1 you overpay, you then don't have to pay any more interest on for the life of the debt. If you keep your repayments the same but less of them now needs to be interest, then you are taking more off the capital (?) debt each month. It's a virtuous circle that can wipe years off your mortgage. I don't think I'm smug about paying off my mortgage several years early, I know it would be more financially savvy to build investments and keep the debt. However, it makes way more sense to me than just paying as little as possible on my mortgage for the full 25 years, which in effect maximises the interest and therefore the amount you end up paying. It's a bit like taking out a store card. The store encourages you to make minimum repayments - the longer you have the debt, the more interest you end up paying overall and the more money they make from you. But if you take ownership and pay it off more quickly than the minimum, you will end up paying less overall.

I paid my mortgage off fairly recently in my mid 30s. Took 11 years rather than the 25 year term. We set our monthly repayments a couple of hundred per month higher than the minimum repayments at the very outset. We then kept the payments at that level rather than lowering them when minimum repayments dropped and moved a few lump sums across from savings here or there.

Nor having children means we have a relatively cheap lifestyle compared to lots of people but we’re not excessively frugal nor especially high earners.

No inheritance or family help with deposits. We just made paying it off a priority. It feels incredibly freeing not having that payment each month.

Very similar to my story, although we will be starting again next year and moving to a bigger detached house as we have very noisy neighbours moved in recently. Already wondering how quickly we can pay it off! 😂 last one was a 35 year mortgage paid off in 12

Some people do bang on about over paying though, that's the point.
Like the whole lifes ambition is about having no mortgage.

Never any thought about those that actually don't like paying the standard mortgage monthly payments itself let alone having spare hundreds to add in.
Or what about those that rent and are unlikely to buy without huge deposits.

What about them?

You're talking about your mortgage on a forum where people rent. Would you expect a renter to barrel in and have a go at you? "At least you have a mortgage" etc.

Only during discussions regarding mortgages. Most people discuss the weather or their ailments.

I'm of the generation where houses are expensive and mortgages are very long term and expensive. Unless you have a huge deposit.
Therefore over paying doesn't come into it.

The main thing is to to able to afford the re payments and hope they don't get much higher. But if they do, know you can afford it. Some small savings put by. Or not spending everything each month.

But that's fine though isn't it? Everyone's doing different stuff,

I get what you're saying I'm also of the mindset that it's good to balance being frugal with living happily.

But by your logic no one can ever talk about anything.

A person with a massive mortgage can't talk about overpaying cause it's not fair on my normal house and no overpayments.

I can't talk about my house and mortgage because someone else can't even afford a deposit and to get on the ladder while they're renting

They can't talk about their nice rented house because someone else is HOMELESS!

I'm not sure anyone LIKES their mortgage payment, hence overpaying it so it's gone sooner and you pay the bank less money overall.

I'm of the generation where houses are expensive and mortgages are very long term and expensive. - a large number of people who have replied on here are in their mid 30s, we're not doddering about humming Vera Lynn. I've certainly never known the days of cheap houses, our house was 5x our combined salary and our interest rate was 5.79%, I've never had an interest rate below 5%. I hated wasting that much in interest that I could spend on other things. I'm only in my 30s and now I have an extra grand a month free to travel, go out etc that I wouldn't have had if I'd stuck to the minimums. And no, I didn't get a windfall, inheritance or any other fictional lump sum, I just upped my payment with each payrise. All overpayments go off the capital sum so you're saving interest every time you overpay and continue to save it for the rest of the mortgage (compound interest).

Interest rates were low for years until recently?
Guess you were unlucky. Yet lucky..