Talk to me about overpaying your mortgage

[CarolinaWeeper]

We have overpaid before in our first house but only once when DH was made redundant but found another job immediately.....we put his redudancy payment straight off the mortgage and it knocked 2 years off our term and helped us with the equity to buy our new house. We have just purchased a much larger house that we intend to be the long term family home but the increase in debt is scaring me a bit. Our mortgage payments are now £1100 a month and we extended the term back to 25 years (was at 18) to enable us to manage the leap now. That term takes us to age 60 and just seems like a huge commitment at the moment.

The (sort of) silver lining is that our childcare bills should dramatically reduce once DC are at school and we currently pay £950 a month in nursery fees so I think it's just a couple of tight years ahead but we wanted to take advantage of the stamp duty holiday to start paying off the big asset now. I would really like to overpay if we can right from the start but may only be able to manage £50 a month for the next couple of years....has anyone else overpaid by small amounts and had it make a difference? Do you just increase your direct debit to the bank?

It is amazing the difference it can make. For many years we could manage the standard payment only. We then increased by 25%, then 50% and should be on track for 100% overpayment this year. Our aim is to take 12 years off the remaining term.

Technically, we still have a mortgage - it’s an offset one which we could have paid off in full 5 years ago (8 yrs early). Instead, we’ve deliberately maintained an extremely small mortgage for flexibility, maintain good credit score and have access to a substantial amount basically for another few years for a tiny amount of interest. We stopped being mortgage tarts/rate chasers a long time ago. The rate hasn’t always been the lowest - 1.5% over BoE rate but that becomes less important, the smaller the loan is! We don’t envisage moving house anytime soon unless it’s to downsize in 20 yrs’ time!

We have continued paying into our pensions but we focused more on mortgage overpayments because it was more important for us to decrease our monthly outgoings sooner and have more disposable income than it was to increase our inaccessible until 55 pension pots.

So, from our mid 40’s for the last 5 yrs, we have had much more disposable income which we have channelled into pensions, investments as well as family holidays and the DC’s education. I’m now nearly 50 and it won’t be a catastrophe if the global recession means redundancy. (Both DH & I lost our jobs back in 2008/9 but were able to find equivalent jobs within the year - not likely if the same was to happen now!)

Pension tax relief is a no brainer but you need liquid assets/funds if life goes pear shaped before you hit 55/56/57. So overpay your mortgage and use your ISA allowance too - just in case!