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Original poster

Mortgage overpayment

10 replies

travelmadmum23 · 10/10/2024 10:58

We currently owe £47000 on our mortgage and currently pay the 10% overpayment allowance. I'm changing mortgage deal to another 7 year fix on a 3.94% rate (currently 2.99%) - Iv worked out I need to save another £180 per month for the next 7 years to be able to pay the mortgage off in full upon our deal ending.

Should I stretch to pay it off (I'll be 38) or should I just leave the remaining £14800 balance (in 2032) and then move mortgage deal again?

My hubby wants to just throw everything at it whilst we are younger and I do agree it is a good financial decision, I do feel we would impact our current living standards especially in regards to travelling.

WWYD?

OP posts:
BuzzieLittleBee · 10/10/2024 11:09

If you fix for a shorter time period, will you get a better rate, and then you could pay the same amount and it would take more off the balance?

Are you depriving yourselves of other things to pay the mortgage off? 38 is extremely young to be mortgage free, so I wouldn't overpay at the expense of having a nice life.

In your shoes, I'd be overpaying more into your pension than paying off the mortgage. Money paid in during your 30s will be accrue interest for 30 years and you'll be grateful for that in your 60s (or before!). So I'd take a cheaper fix (if there was one), max out the pension, and possibly pay off the mortgage in your 40s.

Original poster
travelmadmum23 · 10/10/2024 11:13

BuzzieLittleBee · 10/10/2024 11:09

If you fix for a shorter time period, will you get a better rate, and then you could pay the same amount and it would take more off the balance?

Are you depriving yourselves of other things to pay the mortgage off? 38 is extremely young to be mortgage free, so I wouldn't overpay at the expense of having a nice life.

In your shoes, I'd be overpaying more into your pension than paying off the mortgage. Money paid in during your 30s will be accrue interest for 30 years and you'll be grateful for that in your 60s (or before!). So I'd take a cheaper fix (if there was one), max out the pension, and possibly pay off the mortgage in your 40s.

Thank you - I'll look into my pension contributions and see how that stacks up

OP posts:
oldwhyno · 10/10/2024 11:14

personally I'd be putting spare cash into pensions and isas before overpaying, but I understand there's a psychological benefit from paying off the mortgage for some people.

Serendipitousnight · 10/10/2024 11:18

A 7 yr fix at that rate doesn’t sound a good deal.

I’d never prioritise paying it off quickly for living an actual life.

Original poster
travelmadmum23 · 10/10/2024 16:11

Serendipitousnight · 10/10/2024 11:18

A 7 yr fix at that rate doesn’t sound a good deal.

I’d never prioritise paying it off quickly for living an actual life.

Quite happy with the rate. Only 1% higher than current rate and it's 3.25% lower than SVR. As we have a low mortgage balance it doesn't make as bigger difference as a larger mortgage.

OP posts:
Serendipitousnight · 10/10/2024 22:17

You’d be better off on a tracker and then fix when they drop as your monthly repayment is so low

anibendod · 12/10/2024 14:50

most banks have a minimum sum required for a mortgage (it can vary between £10k - £50k depending on the provider). if you only have a small amount owing at the end of your fix you may find that you get stuck with your provider's SVR or have far fewer deals available to you.

For me it would very much depend on how much of a stretch that £180 would be, and how robust your finances are in general. If £180/month is too much of a compromise on quality of life in the here and now, why not reduce it and give yourself some wiggle room to have the best of both worlds? You'll still repay the mortgage much sooner than you would otherwise have done without putting fun on hold for the next 7 years.

Original poster
travelmadmum23 · 12/10/2024 16:37

anibendod · 12/10/2024 14:50

most banks have a minimum sum required for a mortgage (it can vary between £10k - £50k depending on the provider). if you only have a small amount owing at the end of your fix you may find that you get stuck with your provider's SVR or have far fewer deals available to you.

For me it would very much depend on how much of a stretch that £180 would be, and how robust your finances are in general. If £180/month is too much of a compromise on quality of life in the here and now, why not reduce it and give yourself some wiggle room to have the best of both worlds? You'll still repay the mortgage much sooner than you would otherwise have done without putting fun on hold for the next 7 years.

The £180 isn't a stretch and we can comfortably afford it as things stand. I think I'm going to save the money and pay it off as it stands

OP posts:
BuzzieLittleBee · 12/10/2024 16:43

@travelmadmum23 - instead of saving it, why don't you pay it off your mortgage (via a repayment mortgage)? Every month you're still paying interest on the £180 that remains on your mortgage that you could have paid off. For every bit of the balance that you chip away at, you will reduce the interest and therefore the overall amount you'll repay.

Haven't the several hundred post on here made you see/realise that a repayment mortgage is what you need (in the absence of saving/investments/another repayment vehicle)?

Original poster
travelmadmum23 · 12/10/2024 16:55

BuzzieLittleBee · 12/10/2024 16:43

@travelmadmum23 - instead of saving it, why don't you pay it off your mortgage (via a repayment mortgage)? Every month you're still paying interest on the £180 that remains on your mortgage that you could have paid off. For every bit of the balance that you chip away at, you will reduce the interest and therefore the overall amount you'll repay.

Haven't the several hundred post on here made you see/realise that a repayment mortgage is what you need (in the absence of saving/investments/another repayment vehicle)?

I already overpay my full 10% allowance therefore any extra will incur fees

OP posts:
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