Overpaying Mortgage

[caddywally]

Hi everyone,

My partner and I are looking to buy our first home in the 18 months or so. I'm 24 at the moment and would ideally like to have a baby in my late 20s. I'm a low earner at the moment and I don't see that changing dramatically in the next few years, so if I did have a baby it would be a choice between giving up work and living off my partner's income (also fairly low) or working but most of my salary going on childcare. Either way, it would be a struggle.

To lighten the burden we're going to save like crazy for a few years when we've moved into our house. Would we be better off keeping this money in savings to help when money gets tight if we're essentially only living off one income, or to make overpayments on the mortgage? If we do make overpayments on the mortgage, will the mortgage be recalculated and the monthly repayments adjusted?

Thanks in advance for your advice

Oops - in the next* 18 months or so

If you go into a fixed term and then renew after thw term it could be recalculated dependant on your product.

It will it automatically adjust by you over paying

Will not **

Entirely depends on your mortgage!

DueNov If it isn't recalculated, what happens? Is the term reduced?

If you have a fixed term mortgage then the repayments won't be recalculated until the end of the fixed term, be it 2 or 5 or whatever years. We overpay on our mortgage, because the interest rate is loads higher than what we'd get on interest in savings, and we have some savings put aside should we need them. The money we overpay becomes effectively inaccessible until we remortgage or sell. You never know what's going to happen with interest rates in the future either, especially with brexit... I wouldn't like to say what you should do, but in your situation I'd probably rather have the cash in savings so it's accessible.

When you remortgage you can (i believe) decide to have have the term reduced, or stick with the original term and pay lower repayments

You carry on paying your set out mortgage amount. So yes the term would reduce but if you go into a fixed rate you'll have a fixed amount you have to pay monthly till the contracts up. Fixed rates you usually can only over pay by a certain amount a month too, without being charged.

Friendlylightupbear Thanks for your help I should probably forget about it until we have a mortgage so we know what we're dealing with, but I'm the kind of person who needs to plan 10 years in advance, or I feel like I'm bumbling around aimlessly without a clue where I'm going.

Some mortgages allow you to take a mortgage holiday especially if you have overpaid. Ideal situation would be to split between overpaying mortgage and having accessible savings.

Lonoxo How long do mortgage holidays tend to be?

I don't know but our mortgage does have that option which we haven't used yet.

Caddy you will feel like that until you have a mortgage. I did!! And when fixed term was up I panicked and didnt know what I was doing again lol. Luckily we had a good mortgage advisor and then the bank was helpful over the phone regarding choosing a new product once the fixed rate was up x

Thanks Due! I'm sure I'll be fine when the time comes

Could you and your partner look at retraining in the meantime, so that you can earn more? It seems very sad that at 24, with such a lot of commonsense, you're accepting you'll always have a low salary. Surely now is the time to do something about that?

ImperialBlether I see what you mean, but I haven't even got a clue where to start. I don't know what kind of thing I'd enjoy or be good at, and unfortunately I very rarely see jobs advertised that look like they'd lead anywhere (or if they do, they're completely at the other end of the spectrum and require all sorts of specialist knowledge and experience that I don't have!) I'm not sure if I'm looking in the wrong places.

I am keeping my eyes peeled and I check out the usual job websites a few times a week, but no luck yet. Maybe one day!

Have you looked at offset mortgages? So you can save to reduce mortgage interest but still access th savings if you need to.

Fixmylife Interesting! I've never heard of those before. It sounds like it could be worth looking into. Are there any drawbacks, other than not being able to earn interest on your savings (obviously not a massive issue at the moment)?