No mortgage payment next month-what would you do?

[AntoinetteCosway]

We've just remortgaged and won't owe our first payment to the new bank until July, so we won't have a payment in June. This means we've got about £800 'free' next month.

We've (just!) finished our 6 month emergency fund and we save monthly for things like Christmas and clothes. We're on a very tight budget and aren't planning a holiday for at least a year-and that will probably be in this country. I'm 7 months pregnant and will be on maternity allowance from August to next April, then will start tutoring again. (MA is about the same as I earn anyway so we won't be any worse off.) Apart from the mortgage and DH's student loan we don't have any debt.

Would you, a) use it as an overpayment (allowed, no fees or anything would result from this) or b) save it as a separate little fund for stuff that might come up over the next year? DH had a car accident recently so I know our car insurance will be higher than normal in the Autumn and I'd be reluctant to take the extra out of our emergency fund as it's not really an emergency.

I feel like I am drawn to option a because I hate hate hate debt and am desperate to get the mortgage paid off as soon as humanly possible, but b is probably the more sensible option in the short term.

overpayment. Def.

I'd save it.

Are you sure your first mortgage payment won't be a higher amount than normal with your second and subsequent payments at a lower level? Regardless of whether it is or not I would use if for an overpayment (but I know my DH would spend it on a treat!)

I'd save it in an ISA to use over the next year and the whatever is left use as an overpayment on the mortgage.

Save half and overpay half

I would save it.

They've assured me the first (new) mortgage payment won't be higher than normal as our completion date is 02/06 and the first payment is due on 01/07 and it's paid in arrears. (I had wondered the same!)

I am keen to use it as an OP. DH thinks we should save it. I can see the logic in saving it as once it's OPd we can't get it back, but it would earn a pittance in interest in a savings account but probably knock a month off our mortgage overall!

If you don't agree I'd save half and OP by half. Then you'll both be happy!

Yes, maybe that's our best bet!

Save it. You may feel like taking a week holiday somewhere during your Mat Leave.

Overpayment.

I'd spend it on a little holiday for the two of you before baby arrives personally

I'd keep it to one side for unexpected expenses, washer breaking down etc.

I would save it separately, you never know when you have an emergency - car repair/boiler breakdown etc. But I am super cautious frugal with money .

How long is your mortgage term?

I'd rather save it for an emergency fund tbh.

Spend it.

If you overpay it it's not just the capital it saves but the interest too. Our mortgage works out at £1.44 repayed for each £1 borrowed.

If your dh is worried about car insurance he could join topcashback.co.uk & look at Aviva for a quote (they always work out cheapest for us), plus he could put an older relative on as a named driver which is legal and brings quotes down.

Save it for when you eventually decide on a holiday. If you're not in a position to make regular overpayment s to your mortgage then it's not going to make a difference.

Do you usually pay your car insurance monthly or annually in advance? If it goes up significantly, one way to get it down is to pay it in advance so having a sum in savings would be handy.

Assuming this is your first child, I'd save it. They are an expensive acquisition. You may need a a months deposit for nursery care for example. Lovely dead money.

I'd save most of it in an ISA that you can access in case of emergencies. As you are pregnant, i would probably use a small amount for a nice treat - day out, b+b! theatre trip etc. Maybe up,to £100.

We pay the car insurance annually and have had years of (stupidly not protected) NCB, so it's usually around £200 a year-it's going to be a lot more this time round I think

Holiday would be lovely but we're too frugal to countenance it at the moment!

Second baby. DD would like us to buy a pony for the garden

The remortgage reduces the term to 15 years and we'll be making OPs every month-we aim to overpay by £100-200 a month depending on how much we can squeeze out of the budget/sell etc. We'd like it paid off in 10 years if we can manage it.

We've got a 6 month emergency fund but no additional savings (apart from the yearly stuff like insurances, clothes, bills, MOT etc that we save a set amount for monthly-this isn't really savings though as it's earmarked for use throughout the year).

Over pay - or put £200 to one side and overpay - as said up thread - you don't say what your repayment interest rate is but it will be more than than you will earn in a savings account...and the more you overpay in the early period of a mortgage the more you save - it is £800 (or even £600) you are not paying interest on for the next 10 yrs....
Haven't had a mortgage for a while but when I had mine basically most of the first year repayments were interest - only paying a tiny amount of capital off - the next year slightly more capital paid cos you have paid slightly less interest cos you owe slightly less ...etc etc. Overpay towards the end (when more of your payments are going towards the capital) doesn't save you as much as overpaying in the early years...

In that case, I'd over pay. If you are regularly doing it and you have an emergency, you can access the cash anyway.

I warn you, I'm still bitter about never getting my pony [almost 40]

It won't be easy - initially we had a 30 year mortgage and we've only been paying it for 2 years! We'll need to pay off about £10-15k a year and we earn less than £50k between us. I am just obsessive about not having debt and DH is dragged along for the ride! Hopefully of course we'll get pay rises/I'll go back to full time work during the period which will make it easier.

overpayment.