Is it worth over paying mortgage ?

[interstatelovesong]

I owe 110000 with a house value (currently at least) of 250000

I have 20 months left on a fixed deal at 2% and my repayments are £600 a month which is doable and allows us to have an ok standard of living.

However I am nervous of what the rates will be when I come to the end of my fix. We have about 18 years left of payments I think, I'm 43 and my H is 51 so it probably won't be an option to extend the term.

My mortgage provider allows 10% a year over payments so I've started doing so

I've paid about 1k extra so far and intending to pay about £600 a month extra. but it is literally breaking me financially to do this 😞 . But I am hoping the less I owe at the end of my fixed the less likely it is that my payments will be crippling

How likely do people think is it that rates will be awful in 18months or so? I mean I know no one has a crystal ball 🔮

A few savings accounts offer 5% for regular savings, often with a cap on how much you can save. Most other saving accounts are less, since you dont want a long term fix.

Use a regular saving account for a year, then pay off as a lump sum up to the 10%, Do the same next year but pay off the lump sum after 8 months when your fix ends.

Dont remove all treats from your life. You may die tomorrow, enjoy today.

My interest rate, amount of mortgage remaining and fix expiry date are quite similar to yours. I look at my remaining money after all bill's etc paid then split it 4 ways. between "fun", home DIY, savings and overpaying mortgage.
House needs a fresh small projects doing so means they are being saved towards, my savings are building up towards a 3 month emergency fund and I have a little bit for the odd night out etc. It feels like a good balance, not a huge amount going into each bit, but it all adds up.

If you paid £5000 of your mortgage in 20 month which is £250 each month overpay.

then if the remaining life of your 16 year mortgage was 8% average you would save £50 per month ( total of £9000) on your repayments

thats without any other overpay

If you paid of £12000 over 20 months and then didn’t make any further overpay for the next 16 years you’d save £21000 or £111 per month on your repayments, that’s using the same figures as above at 8%

Thanks for all the advice so far everyone

I'm actually so angry and resentful that I (and others) even have to do this

It's all fucking shit I'm honestly sick of everything

Definitely saving the money is the best option, but I'm not sure that you should use it as a lump sum when you remortgage. That won't reduce your payments much on the new mortgage.
If you keep it in savings then it gives you options. You can drip feed it to reduce the pain of the higher payments or you can hang onto it as a buffer. Normal advice on savings is that you should have 6 months of income in cash to allow you to cope with redundancy, illness, etc. without taking on debt. Of course hardly anyone keeps 6 months of income in savings, but it's good to have a buffer for unexpected costs.

If you save the £600 a month for 20 months you’d have £12000

if you then had monthly interest in that money for 16 years at 8% you’d receive £80 a month

paying off the money for 20 months towards your mortgage and then paying 8% interest for 16 years you’d save £111

youd have £31 less by saving the money

You can usually put a lump sum into the house when you remortgage without penalty so if rates were going up to 8% you could put your lump sum in from savings at that point. There’s value in assets being liquid. Once you overpay the money is inaccessible until you remortgage or potentially even until you sell. If you have some financial disaster in the next few years like losing your job having the savings there could save you from having to take out more expensive loans or defaulting on something and destroying your credit rating. Clearly that depends on having the discipline not to spend your savings unless there’s a real emergency. So personally I’d save rather than overpay.

Aaargh I'm just so confused on the best thing to do

Both ways make sense 🤦‍♀️

I'm not sure that actually crippling yourself now to avoid potentially, maybe, being crippled later is a very good move. It feels a bit like borrowing trouble to me. I would continue to over pay, but reduce the overpayments to a more manageable level to allow a better quality of life.

My thinking is if I overpay by at least £500 a month making my payments £1100 then it won't be such a shock if that's what they go up to. But I'll also have chipped away at the capital

But then my anxiety brain is saying to me "and what if rates are 15%?? They've been that much before" then we'd be fucked regardless of if we manage to pay off an extra 10-20k

I am just so scared 😢 I have clawed my way out of poverty to buy this house 3 years ago it is nothing special really but compared to the shit holes I've lived in in the past it is my dream house and the thought of having to give it up kills me . I work fucking hard and earn a good income and so does my H I'm sick of worrying all the time
This time last year we actually considered ourselves well off; not any more

I think you are over worrying op, if you are able to overpay by £500 a month then you have a really good buffer of income to protect you against any interest rate increases

You need to take a deep breath OP and stop stressing yourself out!.
Interest rates on 5 year fix have already started to drop....albeit a small amount but still, and the forecast is now supposed to peak at 5%.
I think you need to find a balance between overpaying and having fluid money. To have £500pm spare money is a fantastic position to be in so dont put it all towards your mortgage and then resent life because you cant enjoy a takeaway after a hard week at work.

I saw this earlier so fingers crossed it's a good sign

Feel awful for people who've jumped on to a 6% fix though 😔

I dunno tho I just feel like things are so unpredictable. I mean who would have predicted this shitshow 2/3 years ago. The fucking stupid price of food and fuel and now interest rates. I spent years renting and skint I've even been homeless. and when I bought a house it felt like my security it represents that I've finally made it in life but now I feel like it's now threatened. I'm scared of the lack of control over our lives most of us now have and I think over paying is my way of me trying to get some control back

If overpaying makes you feel more secure then it’s worth doing even if you could make slightly more money by putting it in a high interest savings account. I made the same decision myself recently when I put a lump sum into my mortgage (reducing the term by a year in the process). I knew that if I put the money into a savings account I would be more tempted to spend it on other things whereas now it’s gone on the mortgage it feels psychologically like it has been spent already.
You can check with your mortgage provider but with mine, if you have made overpayments you can later make underpayments or take a payment holiday, should you really need to. Thus you can still access the money in an emergency situation like interest rates rising hugely. Which experts are now saying won’t happen anyway, but it’s peace of mind.

Nobody knows for sure what rates will do but as 5 year rates are much less than 2 year rates it’s fair to say the markets expect rates to drop around the 2/3 year point.

Most of us fixed as rates were so good why wouldn’t you, but when this expires contemplate not fixing and getting a variable rate mortgage for a year or more, if payments are affordable and maybe dropping don’t lock on to a higher rate for an extended period, particularly if it’s not really affordable.

Overpaying my mortgage meant I cleared it in 15 years rather than the 25 year term of the original loan. If you calculate how much interest you pay over the life of the mortgage, this resulted in a huge saving.

I used to pay 250 extra per month AND make occasional bigger overpayments if I felt I could. If I was you I would set up a regular overpayment that is lower than the maximum you could overpay so that you have some flexibility.

Reading this with interest. You don't have to overpay monthly, you can save into a higher interest account then pay a large lump sum near the end of the year (or whenever your cutoff time is). Martin Lewis recommends overpaying if your bank interest rate is around a third higher than your mortgage rate, or thereabouts. So that would be 2% on a 1.5% mortgage. However he doesn't factor in what happens afterwards - i.e. by overpaying you reduce the amount of interest on many years of future payments. I'm in a similar situation and unsure what to do but I need to decide by the end of the year.

We took out a five year fix before things went crazy with the mortgage market, thank goodness, and have got until Dec 2026 until we have to remortgage. Currently, we’re overpaying by £100 a month but we’ve got a debt repayment coming to an end in 8 months for £220 so we’ll add that on and be overpaying by £320pcm. We hope to increase our LTV and reduce the years left on the term as we’d absolutely love to retire before 60, preferably around 55.

Do you have to overpay by a set amount or can you vary it? Within the 10% allowed for over-payment.

Our previous mortgage we had a standing order to overpay approx £200 a month, but then I'd also put through anything 'left over' at the end of the month. Sometimes nothing, sometimes really random amounts like £172.11! We opted to pay council
tax over ten months instead of 12, then put the two months money we were used to spending on that towards the mortgage too.

That meant we were regularly overpaying but had flexibility for unexpected expenses and things fluctuating through the year.

10% of the outstanding balance is the max per year

Up to that amount We can just pay what we want. So I do it via online banking whatever I can afford