Overpaying mortgage …

[doneitagain12]

Hello!

looking for abit of advice from “some been there done that kinda people - I understand not to take financial advice off the internet and seek proper professional advice before doing anything… but I’m curious.

Our mortgage rate went up 1.5 years ago, the repayments are still manageable.
I’ve been reading into making over payments, it wasn’t something I was all that clued up about, no family have ever done it to my knowledge and never advised it.

Im 34, I have 26 years remaining on the mortgage. I was looking at overpaying a rather small amount of £100 per month. It’s estimating I’d save £18,000+ in interest and be mortgage free in 21 years instead of 26. So, I’ll be 55….

HOWEVER, I don’t think this is going to be out forever home…. We’ve started a family, just, we have an almost 2 year old. No plans for any more kids but would like a slightly bigger house as we are strapped for space.

So my questions …

Is it worth it if this isn’t going to be our forever home?

if you’ve done it, did you have any regrets? Will that 5 years feel like a massive difference?

and If you’ve done it and are now mortgage free early - what has that meant for you?

Thank you xxxxx

Yep always overpaid and about to be mortgage free in our mid 40s.
Will give us extra money for holidays with the kids while they still want to be seen with us and we're young enough and in good health too.

My DH & I are massive fans of mortgage overpayments. As long as you keep within the overpayment terms of your mortgage you absolutely should do it and take years off your mortgage term.

Make sure though that it comes off the mortgage capital as some lenders do not automatically allocate overpayments this way.

It doesn't matter that you're not in your forever home. You'll be increasing your LTV and potentially unlocking better mortgage rates for your next move.

The way I see it, the more you overpay, the more you save, as bringing the capital down, reduces the interest owed. You get nothing for the interest, that's a charge, so reducing it down makes really good financial sense.

I agree it’s worth doing. We’ll shortly pay ours off more than 5 years early. Even if you’re skint, I’d pay the council tax payment against the mortgage on the 2 months you don’t pay it (assuming you pay over 10 months and not 12.)

Definitely pay more towards your mortgage if you can afford to . The money you build up in capital in the value in your home will make it easier to buy a bigger property . The mortgage company/bank will see you as a more stable customer and will give you a bigger mortgage in the future more easily .
By 55 you will be happy you did . Having no mortgage at that age gives you freedom !!

Thank you everyone for your advice!

Going To sit down, do a financial assessment and knuckle down on overpaying!

Wish I’d read more into it 10 years ago when we brought that house to be honest - but I was 24 and it seemed non-important back then! x

Mmm yes, this I think.

I am same age and overpayed a lot on previous houses. The money moves with you so it doesn’t matter whether ‘this house’ is the forever home or not.

It did enable us to buy a ‘forever home’ (probably won’t be, but if it was it would be more than enough house).

But when I look at our financial position I do have regret about it slightly.

Not a deep regret because I am so pleased we have this house and wouldn’t change it. But a regret that at this age we have so much equity (over 50%), and very little savings/ long term security. Day to day cash flow can be tricky some months.

It’s a bit fur coat and no knickers kind of situation. That’s how I feel anyway.

So my conclusion to the ramble…

if your maxing out both your isa allowances (in a good global stock fund) then of course stick some extra in overpayment

If your equity is something silly like 10% then obviously overpay to get to something better.

Because 12k is nothing really. 12k in 25 years will be like 6k today. And compare that to what return you would get in investment growth.

So balance is the answer.

I would think carefully about overpaying. Interest rates on savings are good at the moment, so for a lot of people it makes no financial sense to overpay on a mortgage which may well be charging you a lower interest rate that the rate that you can get on savings.

I would also make sure that you have a good savings buffer first to cover repairs etc.

I overpaid by chucking in money several times a year - any bonuses etc I got went straight in there. It made a massive difference and as time went by it was easy to see how much it was reducing by. I ended up paying it off 10 years early.

Like others have said, don't stretch yourself too thin, always keep money back for unexpected situations.

In your shoes I would pay into a stocks and shares lifetime ISA (quick before they go!) or a SIPP and then use this to pay off the mortgage at age 60. As if you upsize you’ll still have a mortgage at 60. historically investments will compound well and beat the mortgage interest saved
or I would invest it in a high rate monthly savings account and then once a year move it into mortgage as a chunk or invest in a. Stocks and shares ISA.

Speak to your mortgage company. They told me that we would be better waiting until we could afford a whole extra mortgage payment rather than £100 here and there. Cant remember why.

I set up separate account where we put so much in per month and each time it reached the monthly mortgage amount I rang and paid an extra month. Did this about 3 times a year from year 8 - saved us a fortune and we paid it off so much earlier.

Do check the small print of your mortgage.
One of my daughters is fortunate to have just a small mortgage on a 5 year fix. She has overpaid since the first month with the aim of reducing the term but kept getting notifications that her monthly payments were being reduced.
On investigation she discovered that her mortgage didn’t allow her to reduce the term.
Her term is nearly up she is definitely aiming for a mortgage that does allow that.

Have a look at your bigger financial position. You need savings of at least 9 months take home pay plus a further £3K to deal with emergencies or loss of income. There is also a very strong case for increasing your pension payments rather than using the money to pay off your mortgage.

I did both. When I took out my mortgage the payments were £1150 a month. Within 3 years they were down to £850 a month (a drop in the interest rate helped) but I then heaped all bonus money onto the mortgage and pension in a 50/50 split. Mortgage never got paid off until a couple of years before it was due to end but the final years it was less than £100 a month I had paid it down that much.

I cashed in my pensions 6 weeks ago, £200k in cash and £42.3k a year in annuity. I struck a balance and think I got it right. I’m 58.

1. Definitly do this. The savings on interest alone are worth it and you can always stop overpaying if you need to.
2. The overpayment comes directly off the capital, so when you move home you will have more equity to put against the new house and those mortgage paymentts would be cheper than if you had less equity
3. If you can get your LTV ratio against your next mortgage to <60% this will open up cheper mortgage rates.

I’ma little confused. It doesn’t matter if you plan to move house, because when you move house you will likely need to remortgage and your equity will be higher, therefore reducing your mortgage on your next house.

im not in my forever home, but I overpay my mortgage each month to increase my equity and reduce the mortgage term.

We overpaid ours and cleared it as quickly as we could. When we moved house we had paid it off and bought a house without a mortgage.

We decided that we would keep a maximum in long term savings and then overpay anything extra. The interest rates were in our favour at the time but when factoring interest rates into the decision, I would strongly recommend thinking about whether if you manage to save for overpayments separately, the money won’t get used for something else. For me I know the temptation would have been to spend extra on a holiday or car or home improvement. So for me, I would pay extra off the mortgage as and when you can or increase the direct debit.

We wanted to get rid of it as soon as possible.

its been about ten years since our last payment and I am so glad we did it. We have been able to live much more comfortably and don’t have to worry so much about the cost of living or interest rates. I am also a great believer in that things could get worse so if you can afford to do it then I would. Interest rates could get much higher (hopefully not), it also means we can pay more into pensions

We started off overpaying our mortgage as soon as we could and moved house afterwards. It meant that we had more money in our pot when we moved. After we'd moved we kept paying off as much as we could. Eventually paid our mortgage off nearly a decade early and retired in our 50s. One of the best things we ever did.

The maths says that putting that extra cash in a S&S ISA on an S&P 500 tracker will see you better off over time.

However, we just paid ours off even though we were on a very, very low interest rate and I have to say, it is a relief!

Perhaps you could drip feed in to an ISA, earn the interest and then pay off a lump sum at the end of your mortgage term.

It's definitely worth overpaying it, even by £50 a month. It means you're tackling the loan and not just battling the interest. And if it's not your forever home then you're actually saving money towards your forever home as you'll have a much larger sum paid off.

Just pay whatever you can whenever, every little helps. Some mortgages only allow a certain % of overpayment a year or you get a fine.
We have shaved a few years off our mortgage and hope for more

We did it ! So glad we did now that we are retired and have no mortgage to pay , it’s made a huge difference as we only have a small pension .

I overpaid for 7 years, before I received an inheritance. I decided to use the inheritance to clear it completely, rather than as my brother did keep it but just pay a bit more on mortgage, as I had savings that I thought would be a buffer. Overall I think it's a good idea to pay extra if you can. The LTV should make your next interest rate better. I plan on moving at some point, so I know that my LTV should be fairly good and I can take out a shorter and smaller mortgage. But it depends if it will leave you with enough savings for a buffer, that was the linchpin for me.

I would if you afford too. We over pay and have taken 7 years off the mortgage term

I always overpay as much as possible & its made a huge difference in our capital accumulation.

I started overpaying mine when my tracker mortgage interest rate dropped to 0.5%. I just kept paying the same as I had been so a couple of hundred extra a month. It was amazing how quickly the balance seemed to fall and was such a relief when I phoned the bank to make the final payment.

I’m single so was a weight off my mind knowing I still had a roof over my head whatever life could throw at me.