To be anxious about overpaying the mortgage?

[Toopolitetoask]

I know this is a disagreement me and DH are lucky to have. We bought a house 8 years ago, in a relatively affordable part of the country. We were late thirties when we bought it. Our mortgage is less than what we would be paying if we were renting (there's only the two of us so only needed a 2 bed).

We didn't overpay on the mortgage initially as the house needed quite a lot of work on it which we've now finished and managed to do without taking out loans. I'm keen to start overpaying the mortgage, DH feels we're better off enjoying ourselves (eg long haul holidays). He thinks we can't avoid having a mortgage for most our working life because of buying relatively late, so doesn't see there's much point trying to shorten it.

I'm anxious about having mortgage debt hanging over us for so long. DHs view is we should enjoy our disposable income while we're still relatively young (we do still both put some money into savings and that won't change)

Any thoughts? Fwiw I'm from a low income background and was brought up to be careful with money, eg not using credit. Whereas DH is from a more comfortable background and doesn't worry about money so much, though we both live well within our means.

I would absolutely overpay, even if by a small about each month. It makes the time you pay it off shorter and saves £££ in interest.

Could you calculate an amount each month and thst eoukd allow you to still save for holidays? If you can do both, that would be the best balance.

Another factor to consider is the level of mortgage rates versus savings rates when weighing whether it's worth overpaying and whether it's worth saving. When mortgage rates are high or rising and savings rates are low or falling, is when it is rather telling to set them against each other and do the calculation.

This is something you might look at after you've saved enough for a rainy day and for a specific purpose such as this year's long holiday or when a new boiler, car or furniture is needed.

Long haul holidays unless for specific cultural events or places which are unique are bad in many ways. You can have sunshine in France or Spain instead of further afield.

I paid off my mortgage ten years early by overpaying and taking advantage of deals when below given loan-value. Best thing I ever did financially.

Split the difference.

A little of his preference/a little of his.

No point in being in huge debt when you don't have to be and also no point in being rich in the graveyard.

50/50 and reassess over time.

To give you context of your position, there was someone on here the other day hitting 50 with no pension pot and high mortgage wondering what to do. You're in much better position. From a financial. Point of view load your pensions as much as possible. You could live 20/30 years after retiring and spending that many years trying to stretch a state pension will be a poor existence. That's when you want to have freedom to head off and travel for periods of time or spend summer living in sun.

I think you should save a fixed amount every month into a saving pot and then once a year you decide what to do with it. E.G. at end of year you have £6,000 you then decide to spend 2k on holiday, 2k as overpayment on mortgage and 2k into pension. Certain years you might decide to splurge on holiday and put a little less off the mortgage.
At present you may not be able to or limited in overpaying your mortgage as you're fixed rate so focus on pension so you can still travel and enjoy life when retired.

It'd right that if you overpay in first five years you save more on interest payments as the amount you are paying on is highest it'll ever be. But look you needed to do renos.

If you are on a low rate right now sure overpaying won't save you as much interest if it was higher but it'll reduce your mortgage debt quicker and mean you pay itnoff quicker so when it comes to 2027 when rates are higher the impact will be less.

You have three choices

1. pay as much as u can off and don't relax and have nice holidays. Con of this is thst after being in renovations for a while when do you sit back and judtnrelax abit and enjoy your life?

2. agree a small amount to overpay and have some holidays etc. Con of this is you don't pay off.mortgage quicker than (1)

3. have a year off and enjoy life then start in 2025 paying some off. Con of this is you lose a year of overpaying but how much difference will say £1200 make if u only pay £100 extra a month

You should be thinking in 2027 I'll most likely being paying higher interest and can we absorb that extra amount and if not how can we either bring in more money or lessen the impact.

My deal ends next may I'm on 1.69% I reckon I'll get under 4% and it'll mean extra £200 on my monthly payments as addition interest. It's okay I used to pay that when I first had a mortgage I can cope. But I don't want to pay more interest so this yr I'm having my last yr of multiple trips away ( 3 already planned) and then as my deal ends I'll be cutting back the holidays maybe just one a year and overpaying more to reduce the interest I'll end up paying.

Use the Mortgage Overpayment Calculator to figure out if you're better putting the money into savings, or overpaying directly. A wonderful tool!

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

Another factor to consider is whether your pensions could benefit from being topped up more. I'd argue paying off your mortgage later, but having a much more comfortable retirement, is the better option, and while paying off a mortgage earlier gives you mortgage free years with which to hammer your pension, with pensions, money saved now is worth much more than money saved closer to retirement age.

A lot of people psychologically prefer to pay off their mortgage asap but as one of my whizzy finance friends says, it isn't often the "best use of your balance sheet" ie you can sometimes get more for your money elsewhere than via your mortgage. In your case if you've got a good fix it's probably very good value debt, and knowing how to leverage debt in the right way is one of the keys to building wealth.

I've always overpaid mine, and this is going to hugely pay off next year when I remortgage. I pay £333 a month extra. This has had 3 effects. 1) I've been able to pay off a significant amount whilst on a low interest and therefore when I remortgage next year I'm remortgaging on a greatly reduced amount so the LTV means I'll get a better rate. 2) I'm paying now approx what I would be paying if the interest rates stick at 6% when I remortgage, therefore I won't feel the hit. 3) I will pay off my mortgage 3 years early if I continue.

Sometimes though, I feel poor!! 🤣

I sort of over paid as in when we moved took a sorter term ended up mortgage free in early 40’s

Whilst brilliant now looking back we had to cut back on other things which did curtail our lifestyle

We overpay a tiny bit, think it’s currently £50 a month. But I do lean more to your husbands view of just paying the direct debit minimum and saving the rest, I prefer the thought of having cash in the bank. But also still enjoying life and having holidays, meals out etc.

We are a little bit older than you.
Took out our first mortgage just before rates started falling. It was a tracker. We carried on paying the higher amount as rates fell and fell.
We are mortgage free in our 40s.
It's a brilliant feeling - all be it one that we've not told anyone who knows us about!

I guess I should actually finish my comment...
Yes, mortgage free is lovely. But so is having enough money, and not stressing when things break, and holidays. I think you should go 50:50 splurge and mortgage.

Another option ( I haven't read all the responses so it may well have been suggested) which we have taken is to set up a savings account at a super high rate. We have 3 years left on a very low fixed rate so no point over paying but saving into this pot (8% interest currently) we can build up a chunk to pay off before we move to a new product.

I would go for a middle balance - nothing more miserable than watching the pennies to pay off the mortgage and not be able to do stuff whilst you want to.

I don't know if this is even a thing anymore as I had one for my first ever mortgage years ago (with First Direct): the mortgage and savings account was linked. The money in the savings account was taken into account when calculating payments / interest on the mortgage etc as if it had actually been pain into the mortgage account. But it was available to use as a normal savings account would be. So if you didn't spend it you got the benefit like overpaying, but you had the choice not to.
As I say, that was many years ago. I don't know what products are available these days.

Can you do a bit of both? I agree life is for living, but equally if you can save a bit of interest and have more for your eventual retirement, or be able to retire sooner, that is good too.

As others have said, for us it’s all about getting a balance between living for today and also reducing our big mortgage and paying into a pension too. Partner is a high earner so it makes financial sense to prioritise pension payments via salary sacrifice which save up to 60% tax / NI in the 100-125k income bracket and 40% below this. At 55 we can take 25% of his pension out to pay off the remaining mortgage.

We do also overpay but as a x1 income family (SAHM) we need to keep savings at a minimum level to have a safety net in case of redundancy etc. Also renovating our house too which is a huge money drain

Is your mortgage rate lower than isa rates?
If so put savings into that. You'll earn more interest and still have it if you need it. Then at year end you could use it to pay a chunk off the mortgage and do it again the next year.

Even at 6% it's still the lowest loan you can take out

Sooo many people I know broke their backs and had a boring 30/40s to be mortgage free before retirement and then when they got there they were too old to enjoy the extra money per month

Can you compromise OP and pay a small amount of overpayment off the mortgage and enjoy yourself with the rest! Even an extra £100 per month makes a difference over a period of time.

We just overpaid £15000 in December and plan to over pay another £5000 this year. We calculated that over paying the £15000 at Christmas would save us £8000 in compound interest over the term of the mortgage.
We could reduce our mortgage term when it ends but this means we would have to pay a higher amount every month. Whereas overpayments allow us to pay more if and when we want.

Honestly neither of you are right/wrong here, it's different approaches to life and finances. Personally I'd have the holidays, and enjoy your life. You may not have your health once you've paid off the mortgage and travel may be impossible/not enjoyable. I wonder if you can find a compromise eg over pay a bit and then have long haul hols every couple of years?

Holidays are lovely, but I don't think any holiday has ever given me as much joy as being mortgage free.

I agree it's a balance. We've always overpaid and as a op said when we get a pay rise, half goes to the mortgage and the other half to us.

We've got less than 4 years left to pay and I can't wait for it to be gone - it gives you such security to know your house is yours.