Mortgage overpayment advice

[PRFarmer]

Hi, first time poster here. I need some advice on overpaying my mortgage.

Me and my partner are 1st time buyers in a Halifax 2 year fixed rate deal with an interest rate of 1.29% which ends in 10 months before we go onto standard variable rate where we will owe 110grand.

We are currently overpaying 500 pounds a month and are looking to either up it to the 10 percent overpayment limit or pay a lump sum of 30 grand inheritance when we go onto standard variable rates. Would we save more interest paying max amounts monthly and a smaller lump sum at the end of the fixed rate or just paying the full 30 grand in one go at the end of the fixed rate before remortgaging ? Our interest is calculated daily.

Any reply and personal experience in such matters would be greatly appreciated to a young couple trying to pay a house off in record time.

You need to do the sums based on your exact T&Cs and fees.

First of all, plug in your £500 regular overayment scenario in here: www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

(also look at the savings made if you do the max 10% pa. BEAR IN MIND that in year 2 your 10% will be lower than it is this year. Find out when the new 10% year starts - for example my new 10% is calculated per calendar year, not the anniversary the mortgage started)

Then compare those numbers to any fees due if you pay the 30k lump after you go onto SVR.

Also bear in mind your confidence in getting another deal rather when this one expires, as SVR payments can be quite a whack extra per month.

Why would you stay on the variable?? Just get another 2 or 5 year fix in 10 months

Variable sometimes has fees, which can make it more expensive. There are also penalties if you move or circumstances otherwise change.

We've always had lifetime trackers and it's being cheaper 99% of the time and is completely flexible.

Fixes offer certainty, but that comes at what can be quite a high cost.

If you're interest rate is 1.29%, you can get more than that in savings so just put it in savings instead. No need to pay it off at all.

Sometimes it's psychological though. I'd rather have no mortgage first and foremost, even if I could earn a few quid extra by having it in savings (in fact that is exactly what I am doing, although accept I am also fortunate to have savings as well, just not as much as if I'd plonked all the 10% mortgage overpayments in there too)

Maximise the money you pay in overpayment now up to the 10% max allowed. Then in 10 months when you shop around to change (do not go onto svr), pay the lump sum amount to bring the ltv down and to get even better rates.

That's what I would do.

I have a Halifax mortgage too. If I have understood correctly you have an inheritance of £30k now and want to reduce the amount of interest paid.

If I have understood the facts correctly then I believe the best way to minimise interest would be:

A) Phone Halifax and ask what is the maximum amount you can pay off this year without incurring any fees. This should be 10% of your balance at the start of 2018 minus any overpayments you have already made; then

B) At the start of 2019 you will get a new 10% overpayment allowance without incurring any fees. Overpay 10% of the outstanding balance at the start of January; then

C) If you have any money left to overpay, wait until your fixed term deal ends, make the overpayment, then remortgage for 2 or 5 years as soon as that overpayment has gone through.

Obviously, you may want to check this with Halifax but this seems the best way to me. You would be paying off as much as you can as early as you can without incurring fees, and therefore reducing the interest owed.