How Much Saved Before You Start Overpaying Mortgage?

[Irisheyesrsmiling]

I know everyone recommends overy paying mortgage, and in theory I think it's very smart. However, covid has made me see how easy it is to need to use your emergency fund. Experts seem to suggest 6 months? But here we are six months later with a very real worry it will be another year before normal and some business won't make it.

In light of covid and being a single earner household (single parent), how much would you recommend saving before you start overpaying mortgage? After a very harsh decade of paycheck to paycheck, things are slowly improving with more wiggle room in the budget. How would you choose between saving and overpaying and how much would you want saved before you switch to overpaying?

Likely wanting to move in 2-5 years if that changes anything. Also have 14 years left on mortgage.

We used to save what we could (what could have been the 'overpayment') into a savings account each month. Then, when we came to remortgage each time, we'd have a small savings pot already put by, to pay down what we owe. However, in the meantime, if we'd ever had an emergency, we'd literally still got the cash available.

So it depends to some extent, how secure your job is, as to how much you'd want saved before overpaying on a monthly basis - but that gives you an alternative.

Alternatively, if you've been living on what you have been earning, then you could 'overpay' by the increase in your pay each month, when salary goes up, for example.

Why not save it for a year, then make an overpayment in a lump sum then if you still can?

6 months. Look at the savings limits on universal credit. Overpaying your mortgage now is allowed, removing savings after your circumstances change isn't. And mortgage holidays exist if things get desperate.

I considered that the interest saved by overpaying mortgage was much higher than any interest I could earn in savings. So, we kept 1-2 months expenses on hand and overpaid as much as possible. No other debt, and we had credit cards and possible mortgage holidays for emergencies.

You need to look at how much ready cash you have - I would recommend 6 months of expenses including pension contributions.

I would also recommend upping pension contributions before overpaying mortgage.

Depends on your employment status, credit worthiness (how easy would it be to borrow at a low cost in an emergency), and how close to the wire you are now.

Also check the terms of your mortgage - how often and how big repayments have to be, and if repayments can be reclaimed later.

Our mortgage lets you use overpayments towards repayment holidays in future, which means I'm much happier overpaying more and having less savings.

Martin Lewis did a piece on this and essentially if you can access mortgage holidays and other credit then pay off as much debt as you can and keep less than you might imagine. You could save several hundred in interest a year.

We have always rounded up our mortgage payment to the next £100 figure. So instead of say £360 we pay £400 a month. Not masses but enough to make a small difference. We have about 3 months money saved for worse case scenario.
At the moment my dw is still partly on furlough pay and I took a new job with only 20 hours this month because of the way I was being treated by previous boss over having to shield and the impact that was having on my mental health. So money is incredibly tight so can't save anything at moment but hoping its temporary.

Thank you everyone for the replies and advice. After much thought and reading, as well as personal comfort, and covid, I think I've settled on a plan.

I'm going to start overpaying minimally because it makes such a massive difference. I used the Money Saving Expert's mortgage overpayment calculator. It is amazing what even an extra 100 pcm does to your mortgage. Once I have 12 months income saved then I will start to pay more aggressively. This will take ages but I think knowing I could keep everything going for a year is probably my comfort level especially with covid, single parent etc. This will also help as I do plan to move in a few years and then will have some cash to help with moving costs.

These are massive goals for me tbh but I feel determined and know there will be such peace of mind once I have that money tucked away. Will be good to see what an extra small payment on the mortgage will do too. It was amazing how even 100-200 can knock a year or more off your mortgage.