Overpaying on mortgage

[AIMD]

I am wondering how people have found is most useful to overpay their mortgage?

Do you save a lump sum then overpay or make regular overpayments.

I’m thinking of paying maybe an additional £100 a month on the mortgage (we have daily interest).

That's amazing I cant wait to pay money off it will be financial freedom knowing bo matter what I have a roof over my head that cant be taken away

@OhioOhioOhio i would say at least 6 months, that's enough to cover mortgage, bills, things like running a car and food. I could survive for about 7 months on my savings but things like the window cleaner and Netflix would have to go. I dont really have any big costs bar childcare fees and if I lost my job I guess I wouldnt have those till I found another job.

@pumpkinpie01 - it depends on mortgage rate, length if term and size of capital. Everyone's circumstances will be different. 4 and half years ago I got my mortgage. It was 100k, and as I took it solely in my name, I had to take that over 35 year term. I only started overpaying 2 years ago. So effectively I'd been paying the minimum repayment at the my highest interest rate for 2 and half years.

When I remortgaged in october 2017, my interest rate came down slightly. I then started paying off vast sums. Like pp said the first few years of the mortgage and most of the money you pay gets spent on interest. I now have 30 years and 5 months left on my mortgage term.... but I've knocked it down to 25 years so far. My outstanding balance is 80k now. It would be 92k had I have not overpaid. Every penny really does make a difference, like I said a tenner a month to me would knock a year off over the term.

The other thing to look at is how much interest it saves you over the term. The overpayment calculators make assumptions that everything stays the same. In reality when my fixed term is up in a couple more years, hopefully I will have a much better LTV and be able to get an even cheaper rate when I remortgage. The better the LTV, the better rates you have access to. It's worth overpaying just for that.

There is a section that you fill out on your payment slip that says where to put additional funds (cause you can choose principal, interest, or escrow).

I pay mine through my bank account though, so if I pay extra I put where I want it to go in the "notes" section

Before overpaying you're mortgage you should have a 3-6 months of either income or outgoings saved as an emergency fund.

We did this and knocked six years off our mortgage. Always rounded up the payment Tottenham nearest 100, and when we got pay rises we put half of them towards the overpayment. It made a huge difference.

This is a fantastic thread. Definitely saving as much as I can at the moment. After such a spendthrift pig of a husband it's such a relief. Staying out of the shops saves a fortune.

Good luck with the saving Ohio, must be a liberating feeling to ba able to save now. Money saving expert website is fantastic and they have a section where you can find good deals on various things too. Sorry, I can't rate that website highly enough. Theres also an 'extreme couponing and bargains' page on facebook if you are on it. That can throw up some good things from time to time.

My task this eve, once kids are in bed, is to get logged into the mortgage site and have a think about overpayments (check penalties etc).

This thread has be so motivating!

@OhioOhioOhio I agree this pandemic and not being able to go to shops has really made me realise how much I took earning money for granted and spent it more liberally than I perhaps I needed to e.g. takeaway hot chocolates, eating out etc.

Agree about frittering money, I have been shocked at how much I was spending in Costa, it had to stop.

My friend has a good saying, 'it's all the finer if you don't do it often.' Kind of makes it feel like an extra treat for going without, rather than depriving yourself.

Debt is so cheap at the moment that its not so clear a decision as it might be.

Massive psychological achievement to be mortgage free though, so can see why people overpay even if it might not be the optimal choice to increase wealth.

Agree with the pp about debt being cheap at the moment. Remember though, with interest rates so low, they can only go up, so paying off more of your mortgage now will help reduce the amount of interest paid later on when rates inevitably go up (and double whammy of not being able to over pay due to increased mortgage repayment)

AIMD - let us know how you get on. Best of luck