Mortgage what to do

[backburner]

I've had my head in the sand for too long. I have less than 11 years on my mortgage at the end I will still owe over £50000. My dilemma is do I make over-payments or change my mortgage. I can make as much over payments without a penalty charge my rate is 4.24 %. I know I should have already invested in over payments but I was very naive and didn't really understand things at the time.

Would it be a good idea to pay a chunk off about £10000 and then make over payments for 12 months , I could afford to put about £900 a month on top of my current payments. my mortgage is a part part mortgage so I am paying a section on repayment and £50000 on interest only.

I do not have a pension fund or an emergency fund other than the £10000 I am thinking of putting on my mortgage. Any thoughts on what would be a good option;
A) pay off as much as I can in the next year ?
B) change my mortgage now ?
C) keep what I have and keep making over payments while I can and hope that the rate is not changed dramatically ?

Thank you in advance

You are paying a very high rate of interest. I would look at remortgaging first if you can move your mortgage without penalty. This will free up more income (as your repayments will be lower) so you can overpay. Btw when you arrange to overpay make sure your mortgage company are reducing the term as a result.

Do you have a repayment vehicle for the interest only part of your mortgage? Is that on track? Either way I would seriously consider making the whole mortgage repayment. Overpayments won't have any effect on the interest only part as you aren't paying down any capital. So you will still owe £50k at the end of the term. This will increase your monthly repayments. I would do that first and then see how much disposable income you have.

I would be looking into what pension provision I needed next. Do you have an occupational pension you can pay into? It is crazy not to at least match employer contributions.

You also need an emergency fund so I would keep the £10K for that and not use it to pay down the mortgage. Rule of thumb is 3 months living expenses but you may also need money for new boilers, repairs etc.

Check whether the interest rate on your savings is less than in on mortgage. If savings are a higher rate it usually makes more sense to save.

Have a look at money saving expert site which has some good calculators too along with helpful info.

Your situation sounds fairly complex and you could be missing out on things you need to save for/insurance for, if you haven't even thought about retirement yet, so it may be worth seeing a financial adviser to go through everything.

I agree with everything MiniMum has said. (I work for a bank). Look at remortgaging ASAP - you could save 100s per month straightaway.
Don't beat yourself up - you're doing the right thing now.

MiniMum97

palahvah

Thank you both, I didn't expect a reply so fast. I called the bank and asked about my mortgage and they said it was possible to pay into the different sub accounts. I am just at a loss with how to sort this out.

I need to call them back and make a list of things I need to know, I thought I would be able to pay chunks of the interest. I am too late for a pension and thought that if I at least had paid for my house that would be something to make life easier in the future. It is very difficult to get an appointment with the bank last time I tried they said it was a six week wait.

Thank you

Don't worry about an appointment with the bank, other than telling you about your current product and how to overpay they won't be very useful in terms of your options. Get an appointment with a few independent mortgage advisers who give free advice such as London and Country.

I am not sure what your bank mean by "paying into different sub accounts"? Perhaps call and ask for an explanation of this. Explain that you want to overpay to reduce your term and ask how to go about this. Be specific with your questions and write down the answers so you have a record.

You really need to speak to an independent mortgage adviser about your options and current rates available elsewhere. And need to change your interest only into a repyt ASAP, especially if you have no repayment vehicle.

Depending on who your mortgage is with, there's a new product for retirees, which allows you to carry on paying interest only until you either go into a care home or die. I know the Nationwide are doing this. You don't say your age, so you might not be old enough.

You'd be much better seeing an independent broker than your bank - they'll have access to to a wider range of products. Your interest rate is quite high.
London and Country are free and good, you deal with them by phone and email, but if you'd prefer a face-to-face appointment we used one linked to a local estate agent and it was £200, that included advise on life insurance etc as well as the mortgage.
There is a mortgage overpayment calculator on the money saving expert website so you can see how quickly you could pay it off, that might help you visualise it. If you paid off your main part of the mortgage in, say, 6 years, you'd have 5 years to save the £50k that is on interest only.
I'd probably keep 3-6 months living costs in an accessible account in case of emergencies, and overpay any extra.

MiniMum97

The sub accounts are the repayment part and the interest part.

Singlenotsingle I am not at retirement age 'thank god'

AwkwardPaws27
I am just looking at the calculators they are really helpful

I am so pleased I posted lots of good advice , I was worried about changing mortgages as I work employed part time and I am also self employed part time. It makes it more confusing but i have a fair income and do not have any other debts other than my mortgage.

Two of you have mentioned London and Country so I am going to do some googling. I didn't anticipate I would be in this position a few years ago but life takes different turns to those that we thought we would have.

I get overwhelmed with Banks , had some disastrous experiences in my student days and did have lots of historic loans thankfully all have been paid for many years. I have only recently started looking at things as I want to put myself in a better position.

I really appreciate all the input thank you all again .

Definitely consult an independent mortgage broker. I have an excellent one I’d be happy to recommend if you pm me. He’s brilliant and he was first recommended to me on here.

Good luck! Mortgages can be so confusing.

Phone London and Country they are very good.

We’re out miss sold the mortgage?

You are the banks' favourite kind of customer - the inertia customer who stays with the same bank once their initial deal has expired. That's where they make the bulk of their mortgage profits. If you had changed earlier you could have saved thousands over the years.

But it's still worth changing as you should easily get a rate around 1.45% for a 2 year fix and that'd allow you to make overpayments (usually up to 10% of the outstanding balance/year) if you you want to.

If you don't want to apply yourself then go with the suggestions above and see a mortgage broker/advisor - though they will charge you in some cases. A broker might be the best option as they'd be able to advise you the best way to get the remaining balance cleared in the shortest time.

I have been in contact with London and Country , I just need to sort out some of my paperwork and I will update.
Iris1654 I do not think I was miss sold. I've just misunderstood the importance of reading small print and keeping up to date, my own fault.

Thanks again very helpful suggestions from all .

If you want a mortgage broker recommendation, I cannot rate David Baker at LIFT Financial highly enough. He searches whole of market, and has got us cracking deals twice now (less than 1.5% each time). Google him!