To think we can manage this mortgage

[Whistlere]

House: 490k
Mortgage: 290k - 5 yr fixed at 3.86%
Net pay: 3400 per month
Mortgage monthly repayment: 1500

Savings: 90k
ISA stocks and shares: £60k

Looking to overpay the mortgage by 10% a year.

Early 40s with 2 kids in primary school.

I know it’s not sensible but I think it’s manageable, although I am worried what will happen if one of us loses their job.

if you're just comparing rates. But have you compared it over the life of your Mortgage?

You are setting yourself up for a very miserable existence. I’d hate every minute of it.

Take home is similar with no kids and a £600 mortgage. I would not want to be paying that much with kids!! Add up all your other outgoings and you won’t be left with much.

Thats fine - keep the savings firmly locked away incase you lose an income and need to make mortgage payments from it.

Think think you would be absolutely fine.

Are you sure this is the case when you calculate the interest owed on the mortgage in terms of actual money not just looking at percentage?

we thought it was better for us to save as the % rate was higher on the savings account than the mortgage rate %. But we quickly realised that the size of the mortgage being greater means X% interest accrued on the balance of the mortgage is higher than the savings we were putting away, even if the savings on the face of it looks like a better rate.

by throwing money at the mortgage you will likely be having more impact than saving as the mortgage is a much higher number than the savings.

i hope that makes sense - sorry if that is a bit word soupy! Basically 4% on 90k is much smaller than 3% on £450k

Just over a year.

by throwing money at the mortgage you will likely be having more impact than saving as the mortgage is a much higher number than the savings

It really doesn't.

i hope that makes sense - sorry if that is a bit word soupy! Basically 4% on 90k is much smaller than 3% on £450k

But the OP/you have £90k to overpay with or save. So you're better off earning 4% on £90k and paying 3% on £450k than paying 3% on £450k-£90k = £360k but earning nothing on nothing. It's basic maths.

its possible that I am not correct here but I believe that for my scenario, it was better to throw money at it. the interest on the mortgage was around £30 or £35 a day. I think I was better off overpaying an additional £200 per month than putting the £200 per month into savings, as this brought down the overall amount left on the mortgage and therefore the amount of interest. Nationwide have a great overpayment calculator that can do some sums regarding what it can look like to over pay a regular amount or a lump sum or both and will show how much you save by doing this.

No, you're wrong. If you have £200 to overpay and the mortgage interest rate is 3% but you can save at 4%, the best use of that £200 is to save it, earn 4% while paying 3% on the £200 that you haven't overpaid.

I think it’s too much on a monthly basis. If it was me then I’d need to use my savings every single month and therefore not worth it.
We earn (net) more than double your monthly income and mortgage is £1600 on same value home and I couldn’t live on less. I like to be able to have a life and eat etc. Your outgoings would make that impossible. As well as mortgage you have usual monthly outgoings, insurances, utilities, council tax, phones, cars, etc. Then food, petrol. What’s left? Anything ? What about clothes/nights out/birthdays/holidays/xmas. How will you live?

I still don’t fully understand how that works with the vast difference in numbers involved but that is likely a me problem!

Nope I don’t think it is , not if you want some quality of life after paying mortgage and bills though I suppose you could dip into savings for holidays and such .

Where are you getting 3.86% from? I can only see 3.99% so am very keen to know!

My take home pay was £3,600 and my mortgage was £1,550 and in all honesty, it was a real struggle as a single parent with 4 children. Now the divorce has gone through and I’ve bought my own much smaller house with a 1k per month mortgage repayment, I’m so much happier and it’s a huge relief to not be under so much financial pressure every month. Although the house is much smaller, I’d take that any day to not be constantly worrying about money. Benefits too that bills are less, council tax etc!

But you'll be paying tax on the interest so unless you get a very good return you may struggle to beat what you'd save on mortgage interest.

Going off Martin Lewis advice if the interest on savings is low he says better to pay off mortgage. £500 is not a lot over 12 months how much interest would it be monthly On the mortgage?
its ok saying you will pay off more each month if you lost your job the mortgage will be the same amount as now but if you lower the mortgage with your savings your monthly payments will be lower and more manageable on 1 income.

You're only reducing your mortgage by the amount you overpay, not the entire balance. You still paying interest on the majority of that balance whatever you do with the overpayments.
So long as you can save tax free, then you can make a direct comparison of rates to see what is better. If you have to pay tax on your savings, because you exceed the savings allowance and have maxed ISAs, then you'd need to adjust for that when looking at your savings interest rate.
Also assuming you're reinvesting the income means you benefit from compound interest on the savings, as you would on reducing the mortgage.

Got it. Thank you.☺️

We have similar take home pay to you but no mortgage. I’d say we’re pretty comfortable (one abroad holiday & one uk holiday each year, occasional meals out etc.) but we still have to watch our spending because every month there seems to be an added expense - car insurance, house maintenance etc.
Theres no way we could cope with that kind of mortgage & I honestly don’t know how you passed the affordability test.
Sorry to be so negative but everything is so expensive I think you’ll really struggle without seriously eating into your savings each month (which you might be happy with so that’s fine.)
I haven’t read the whole thread but if it’s not too late I would definitely use some of your savings to reduce the mortgage. I’m very risk averse though!!

If you throw the £90k into the house purchase to reduce the mortgage you’ll pay £1050 a month. That’s reduced your repayments by a third. It’s a far more manageable sum and you still have the 60k in equities. If you invest the 90,000 instead, you will be lucky to get the £450 a month you save on your mortgage from that. You would need a 6% rate of return which you might get from stocks if you are very lucky (and a good picker) but if you go the safer route on a time deposit it’s hard to get more than 4.25% now. And you have to pay tax on that. I don’t see any way that the 90k could be used better and more profitably than reducing the mortgage.

I wouldn't fix for 5 years rates are likely to come down in that time that's why it's cheaper to fix just now

That’s less net pay than we bring home, and a quite considerably bigger mortgage (£140k mortgage on a £1million property - not sure of our exact rate but we pay £830 a month). We save a bit each month but have nowhere near your savings as we have chosen to pay down the mortgage every time we have inherited or been gifted large sums of money.

Ultimately though it really depends on your other outgoings - we don’t spend on things like eating out or hair / nails etc, and we have no car payments as bought our cars second hand, but I do have 2 horses and we spend a lot on sports clubs and training for all 4 of us (2 tween / teen children who are national level at their sports and do others to county / regional as well). I reckon we save somewhere between £200 and £800 a month depending on other irregular costs (things like big competitions, accommodation and travel to those events, unexpected horsey costs or similar that might crop up but also might not). I can see that a family who didn’t have the same
outgoings as is or just at a smaller scale would be able to manage a bigger mortgage on less income.

erm what?

the curve is pretty flat actually, with 5 year swaps only like 10bps below the 2 year. 6 year going back up again.

let me tell you as someone who has probably designed the mortgages that some of the people on this thread have, it is a fools errand trying to predict the market, 9/10 you’ll lose

6% growth in investments is not ‘very lucky’ that’s actually a relatively modest growth.

investments are to be held for the long term not short term and cash savings have risk attached too.

don’t portray all investments as ‘stocks’ this isn’t correct. Exclusive stock investments or index funds are one of the highest risk types of investments there are plenty of others out there that are managed and diverse asset classes (and locations) that mitigate the volatility of ‘stocks’