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

Hello Liz 👋🏻

If you are serious then you need to sit down and revise your numbers. Overpaying now means paying less in total to the bank. Most people can save tens of thousands of pounds this way.

This might blow your mind but not everyone is going to get an inheritance. Increasingly we will
see more and more people forced to spend their money on their care in old age.

This was my thinking. If they have a mortgage I'm not sure they fully understood what they signed

Hahaha

I don’t think OP can Maths 😂

We've overpaid on our mortgage the last few years by roughly £200 and we've shortened our mortgage by a good 5/6 years and we won't pay as much interest when it comes round to renewing. It's a win win, don't understand anybody who can afford it doesn't do it!!!!

It’s not misunderstanding maths though because maths doesn’t come into it when you’re taking about freedom and piece of mind.
If I over pay the mortgage it means I will have a significantly lower minimum payment on my mortgage in 10 years. If I suddenly become ill and not able to work as much or lose my income I have a lot more flexibility.

Long term savings will firstly be put at risk if they are invested and most importantly they will not be easy access. So it absolutely matters where different savings sit.

Is that the type where you pay lump sum at the end and many now claim they didn't understand that not paying off capital monthly means you will at the end have to pay off the capital at once?

But that's a false economy. If your mortgage is 1% and a 1yr fixed savings account is 4% you'd be better off saving for a year and then paying off a lump. There is no more financial freedom in putting it on a mortgage if you are saving less on the amount than you could be earning elsewhere. Then it's just a matter of perception (for you), it's not factual.

I did have some acquaintances who had an interest only mortgage and who hadn’t made any provision to pay off the capital. They downsized when their mortgage term ended and bought a house with the equity they’d gained. Not what I would do, but it worked for them. 🤷🏼‍♀️

I got my first mortgage in the prime endowment policy mis-selling era. I ended up swapping to a repayment mortgage and continuing with the endowment policy so I did end up with a small lump sum at the end which was around 2/3rds of the original mortgage. Maybe the OP is thinking of endowment mortgages?

Do you... understand how mortgages... work?

The overpayments we made will save us approximately £80k in interest and allow us to be mortgage free in 5-10 years rather than almost 35. It's a no brainer. Not everyone can rely on receiving an inheritance down the line, but the certainly wont.

We deliberately bought a house 30% cheaper than the bank offered us and set the term at a much longer length than suggested. Our mortgage has no cap for overpaying. In reality, that means that by overpaying, we've already shaved a decade off the term, we can drop down to minimum payments if necessary to save cash, we have a buffer of 18 months where we could pay precisely nothing and still be on track and we stress tested to 15% interest rates and found it manageable. When we sell or remortgage in a few years, we will be in a significantly stronger position.

Not sure I understand the problem.

I get what you're saying. I guess there's the temptation to spend the money in the savings account so you'd have to lock it away

I mean, overpaying makes sense if
a) you can afford it
b) mortgage interest rate is higher than savings rates
c) you won’t need a lump sum at any point for emergencies, eg you have one already.

Most savings companies offer fixed rate bonds where you cannot access the money until the end of the term.

What future do you foresee for such borrowers, and the property ?

Hmmm, not really thought about this have you 🙄

Yes just have to think smart

I replied above that acquaintances downsized and bought a property with the equity they’d gained.

If you put it in a mortgage you can't get it out either. It's the same.

I overpay by £400 p/month - I'm not smug, I'm skint because of it but I want to be mortgage free as soon as possible

there are different sorts of mortgages, with some mortgages there is little point in it. Other mortgages have excellent terms of overpayments, making it effectively an excellent saving account linked to your mortgage.

Of course in the current climate people who can afford their mortgage and still pay regularly into a savings account are a bit privileged.

But if the interest rate is higher in the savings account, you make more money than by overpaying the mortgage.

In 35 years? Well, as the average mortgage is over 25 years, I think they might be doing it wrong. Not everyone is going to get an inheritance to pay off their mortgage, that's a ridiculous thing to say. I also don't think you're as financially illiterate as you're appearing to be here, but if you are, you probably shouldn't go for anything more complex than a piggy bank.

How about this, the sooner the damn thing is paid for the sooner that money can be spent on: new wardrobe of clothes, a designer purse I’ve wanted all my life, a trip overseas I’ve dreamed of for 20+ years etc.