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Original poster

Do you overpay on your mortgage?

53 replies

Fourbyfour · 17/02/2017 15:01

If so, by a lot? Is it worth doing or putting into savings instead?
If not, I'm interested to know why not.
We pay the agreed amount only at the moment but wonder if we should overpay somewhat and put slightly less into savings (still putting some into savings of course).
Is even just a £100 extra paid on the mortgage a month worth it?

OP posts:

Rattysparklebum · 17/02/2017 17:04

We have an offset mortgage, it is just like having a huuuge overdraft, all our savings and spare money at the end of the month comes off what we owe, we have just effectively paid off our mortgage 7 years early, it would have been sooner if OH hadn't had a midlife crisis and borrowed back some equity to buy a motorbike!

Klaptout · 17/02/2017 17:21

We paid of 10% a year with paying a penalty.
I don't know much about ISA but worth checking if it would do better in there and then pay a lump sum off.

EineKleine · 17/02/2017 17:37

Yes when we can, aiming to pay it off early around when our eldest starts uni (if she chooses that) so we are more able to help DC out then.

I totally respect Namechanged's perspective. For our own feeling of security we track what house our current equity could buy outright should we need to reduce our outgoings suddenly.

scaryteacher · 17/02/2017 17:47

We will be chunking it off as dh retires in 2019, and I want the mortgage gone by then. We will finish paying for ds at uni after his MA in mid 18, so a bit more of an opportunity to save money then.

unlimiteddilutingjuice · 17/02/2017 17:51

We used to. Interest rates being what they are; we thought the money would be better buying bricks than sitting in a savings account, quietly depreciating.
The savings are looking a bit low though, so I've started filling the savings account instead. So we can have a little buffer and some holiday spending money.

Lilmisskittykat · 18/02/2017 13:13

I've had my home for 10 years and dabbled with overpaying bits here and there. Since last year we have made a n effort to up this and do it monthly.

overpaying was a sensible place to put the money as it's making nothing in interest.

I have always asked for the monthly reduction in payment not a reduction in term. As I see it if anything happens it's nicer to have the smallest commitment. I work in local government in the north so everything feels a bit ropey up here job security wise.

I don't really care for the future end date I just like a small monthly commitment easy to handle. If I have extra left at the end of the month I pay it off but life is for living

RebelandaStunner · 18/02/2017 18:25

Yes we overpay by quite a lot every month because we want to be mortgage free in a couple of years then save up to retire early. We have nearly always had a mortgage and always overpaid to clear it asap which has enabled us to invest in property.
We have only made overpayments that we could easily afford and not had to cut back or live frugally.

MiaowTheCat · 18/02/2017 18:27

This reply has been deleted

Message withdrawn at poster's request.

EllaHen · 18/02/2017 18:29

We did on our last house. It enabled us to buy our current house. Definitely worth it for us. You have reminded me that we must start overpaying again.

BabyHamster · 18/02/2017 18:47

Yes, we overpay. We focused on saving first. Once we thought we had enough saved as a contingency we switched focus to the mortgage.

We went without for years and years though in order to get enough for a decent deposit. So these days we don't overpay as much as we probably could. It is just so nice to have a bit more disposable cash that I'm reluctant to go back to being super sensible and thrifty.

Original poster

Fourbyfour · 18/02/2017 19:56

We need to boost our contingency savings first I think, then we will start to over pay.
This starts a whole new topic really, but how much contingency is good to have? At what point would you think we have enough in savings to start paying off more on the mortgage?

OP posts:

HollyBollyBooBoo · 18/02/2017 19:59

Yes i do. Child maintenance will stop from ExH in 12 years time and I want the mortgage paid off at the same time so that I can leave my work and have a career change, probably having my own small business.

So I've used an online calculator and overpay to ensure the mortgage is paid off at the same time.

It is the equivalent of us having 1 week abroad in a 5 star hotel but I'd rather have a long term plan that 1 week of indulgence per year.

Binkybix · 18/02/2017 20:06

We don't at the moment apart from the odd chunk here and there because we might need the cash and would like to keep the flexibility for now . But we save an amount that we set aside for an overpayment when we want to, and it's invested to make a shade more than our mortgage rate. We used to pay off extra though.

thatwouldbeanecumenicalmatter · 18/02/2017 20:06

HSBC have an overpayment online calculator that has a graph that I'm obsessed with

We overpay but save as well, overpaying for obvious reasons of shortening term but also as an extra cushion in case we need to take a payment break.

BackforGood · 18/02/2017 20:08

We did for years and now have paid it off. Makes a lot of sense if you can. We started paying a mortgage when rates were really high, so, as they started to drop we'd overpay, or, whentied into a deal would save the difference each month and pay off a chunk at remortgaging time.

GreyBird84 · 18/02/2017 20:12

Our fixed rate means we can't, due to be paid off by 55. I would like to get that down to 50 at least.
We took out a 30 year term when we were 25.

HollyBollyBooBoo · 18/02/2017 20:17

On your second question about savings I think they say to keep 6 months out goings in savings. I probably have about 2 months worth after buying a car last Nov. Hopefully it'll be back up to 6 months worth by the end of this year.

bluemarble · 18/02/2017 22:56

I overpay by £250 a month, my lender allows you to build up a 'pot' of overpayments so if I needed to take a payment holiday or reduce payments for a period then I could use the overpayments to do that. (So eg if I had overpaid by £5k in total and monthly payments were £1k I could take a payment holiday for 5months). If you don't use it then the overpayments reduce the term and interest is reduced as the overpayments are taken into account.

I thought this was useful so that if I was to lose my job or something then I would have some flexibility so almost as good as having the cash in the bank but also reducing interest paid.

I aim for 6months essential expenses as contingency savings.

Equimum · 19/02/2017 08:26

We've been overpaying by about £250/ nth on our current house. This has enabled up, together with it's increasing value, to put look a buying a more expensive property sooner than we expected. Once we move, though, the overpayments will stop for a while.

RockNRollNerd · 19/02/2017 11:19

Definitely build up a bit of a savings buffer first - as others have said 6 months is ideal if possible. Lots of people say 3 but three months goes surprisingly quickly when you're job hunting in my experience. I would aim for 6 months of modest outgoings ie factor in that you wouldn't be saving in those months, no holiday, cut back on extravagences etc.

Money savings expert has some fabulous overpayment calculators that make it very clear how much even small over payments reduce your term by - plug some numbers in and have a look, it's surprising how even £100 a month on a 20 year mortgage will make a difference.

scrivette · 19/02/2017 11:26

Yes we do at the moment, although we want to remortgage to pay for an extension in a few years time.

SvartePetter · 19/02/2017 11:42

I used to, but as we have good interest rates on both our home and a btl property and they are both less than 50% LTV, I prioritise putting savings into an s&s isa. I feel that I get more return on investment on the isa than I would save by reducing the mortgage. This is a riskier strategy, but I also see the loosing out of revenue as a risk. If interest rates went up again, I would reconsider.

Needmoresleep · 19/02/2017 11:50

An offset mortgage has worked for us. The slightly higher interest rate is mitigated by the fact that the balance is reduced on the day any money goes in.

It has given us the flexibility to effectively overpay when we have the money, but also access money when we have needed to. For example we were able to lend my mother money so she could buy a sheltered housing flat when her money was tied up in long term (missold) investments.

We are reasonably thrifty so tend to spend less than we earn, so benefit from the flexibility. But not something for someone who would be tempted to spend if money is available. I like the fact that we only have one account so have not needed to spend time thinking about money and savings.

Tfoot75 · 19/02/2017 11:54

We used to overpay on our first house by £100, it would have shortened the term by around 4-5 years I think. Depends on whether you need access to your savings before the mortgage term is up really. We will overpay again soon as soon as we can afford it to reduce the term.

Perfectlypurple · 19/02/2017 11:57

We sometimes pay off a bit of a lump sum, last time I paid off 5k and knocked 7 months off the mortgage. Also, a few years ago we remortgaged, with the change in interest rate and LTV we could have reduced our monthly payments by a few hundred quid but reduced the term instead and knocked 6 years off that way. We have just over 11 years left on our mortgage but I want to pay it off in the next 6 years if I can. My dh is due to retire in just over 6 years so although we would be able to afford it with his pensions I would really like to not have to use his lump sum or still have mortgage payments as I would like the option of reducing my hours if I can.

That said I try to have a balance between wanting to pay huge amounts of the mortgage and still having luxuries. Next year we want to do a luxury holiday somtrying to ignore how many months that would take off the mortgage.

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