Mortgage overpayment support thread!

[RosieLeaLovesTea]

Ok I’ve set myself a goal to overpay the mortgage and try to pay off in 10-12 yrs rather than 25! I wondered if others are doing the same? We need a support thread!
encouraging each other and keeping motivated as it feels like a long stretch!

how are you doing it -earning extra income/overtime? Taking in a lodger? Going without luxuries and holidays?

all are welcome to share your experiences!

Offset mortgage is great if wanting to overpay early
You can over pay by any amount or have a saving account linked so you only pay interest on the difference.

You can also take out overpayment if you need money for an emergency or other expenses

We paid off in 10 years this way. We also took out overpayment to buy a vehicle when ours was no longer road worthy.

I paid my mortgage off years ago when rates were very volatile. The way I did it was to maintain the same payment as rates came down meaning I was constantly increasing my overpayment (no 10% limit).
Colleagues used the drop in rates to spend more on holidays etc, I was happy to use it to reduce my mortgage term (by half).

At the same time I used my annual wage rise to increase my pension contributions.
A double whammy.

@Changeagain3 how does an offset mortgage work? I've found it really hard to find a simple online guide of how we go about switching to one

Our mortgage is £900 a month and we overpay by another £1500 every month but this does leave everything a little tight. Sometimes we have to skip an overpayment if we have a big bill come in but we are keen to pay off our mortgage before the end of our deal that ends in just over 4 years.

We regularly overpay by more than 10% per year. We’ve found the repayment charge is significantly less than the interest we’d have paid so it’s always been worth doing.

For example

You borrow 100000 over 30 years. With interest this gives a monthly payment of £500 (this is estimate not actual )
You have 10000 in savings so interest is calculated on 90000 this reduces your term by x number of months.

You then overpay each month by 100 so monthly payment is 600 this also reduces the term

Because term is reduced the amount of interest that will be paid over the term will be less.

Because you have overpaid if you had an unexpected expense or had a loss to f earning you would be able to reduce if necessary or even take a payment break if you needed too but generally people like to see it coming down are are keen to see that continue (it's nice knowing you have a safety net through)

It's usually 10% of the capital so if your mortgage payment each month is made up of interest and capital, overpaying by 50% of the whole payment is likely to be less than 10% capital.

Great idea OP. We overpay by £50 per month, not much but it does make a difference.

The money saving expert overpayment calculator is a nice way to see how much you save by overlaying even small amounts.

If you have a Monzo account you can link your mortgage and it has an amazing early repayment calculator .

Now the children have finally got some nursery free hours I aim to pay £250 pcm extra .
This should take10 years off my mortgage !

Hopefully when the children are in school I may even be able to wack £350 a month off! We only have a small house but my dream/ goal is to be mortgage free by 48!

You need to check directly with your mortgage provider. I found out the following:-

Up to 10% per annum of outstanding balance, any more incurs ERC. On our mortgage account this is taken off the capital amount still owing.

Overpayments can still be made even after maxing the 10% - these reduce the term of the mortgage- it pays it off quicker and saves some interest

BUT and this also…..(on our mortgage account, do check yours) when a product is due to end ie the fixed rate deal we can pay up to 90% of capital balance owing within the 90days before product end date - this does not incur any EPC

For us we have utilised all three and forgone a sizeable home improvement to take advantage of the product ending. We still have a way to go but we are 40% loan to equity value which feels more secure. The other advantage of being in this process is due to favourable loan to equity, it means if we needed to sell quick we have some capacity to play with. We’d only do this if we absolutely had to as we plan to stay here well into retirement.

I am addicted to that calculator!

Our mortgage adviser advised us against an offset. He said the rates are worse, so as long as we'd not need the money back out we'd be better with a tracker than an offset as that allows unlimited overpayments and generally better rates.

I've started putting away a chunk of money each month into the cash ISA as this gives a better return (currently 5%) than the saving I would get from it going into mortgage each month (currently 4.4 interest rate). I figured that I will build up this pot and then pay off a big lump sum at the end of my five year fix.
Is this the best way to do it? I researched it but now having read everyone paying off monthly I'm questioning myself.

What I have found really annoying is what happened when I made an overpayment. Last month I made a 10% overpayment using an inheritance, which brought my mortgage down to £300,000. I figured it would reduce how long I have to repay (currently until I’m 70!), but instead the bank has reduced my monthly payments. I will put the money aside over the year, and then make a small overpayment, but how can I ensure it reduces the length of the mortgage rather than the monthly repayments?

For some mortgages (like ours), you have to call the mortgage provider to ask. I have to warn the mortgage provider every time I would want to do an overpayment to ensure it goes towards shortening the term, not lowering the monthly amount.

We try to overpay by around 40% each month (so 40% on top of our usual contribution). Instead of 100 pounds a month, 140.

We use the Money Saving Expert's Overpayment calculators a lot to see what might make sense for us.

Our stupidly low % fix ends in 2 yrs. The balance will be around £97k at that point, its a really lofty goal but we are aiming to have all or even most of that to pay it off at the end of the fix. Current savings are around 25% of the end balance earning interest so we have a huge amount to save in 2yrs if we can knuckle down.
I worked it out that it would save us around £18k of interest if we paid the mortgage off 18yrs early. Then the kids will be uni age so we can help with that.

That's what we do too. We have a stocks and shares isa which gives strong returns. So much so that when our current 1.5% fixed rate ends I'm not sure using the cash to pay off the mortgage would be the right thing to do. We also have money elsewhere (premium bonds, cash etc) so don't put all our eggs in one basket.

I'm also quite focused on paying into my pension which obviously has a lot of tax and long term benefits.

I paid mine off last year, 6 years from when I set myself the goal to pay it off. It was a 25 year term.

I got myself a mortgage that allowed unlimited overpayments, and that wouldn't change the repayment amount if I overpaid, so this remained the same and I just overpaid (repeatedly!!)

I then found an overpayment calculator on my mortgage company's website, and worked out how much interest would be saved from £100 per month and how much the term would reduce by. By entering higher amounts (£150, £200 etc), I motivated myself to save anything I could. And every spare £1, went on the mortgage. If I sold something on eBay, I paid off £8 of mortgage, every bonus, every spare £20 I had at the end of the month, it all went into the mortgage. I was obsessed!!

Slowly but surely, the balance started to drop and then one day, it was gone. I cried when I phoned the bank to ask doe the final redemption figure, it was a massive massive achievement. I had holes in my underwear, bought my clothes in charity shops because I banned myself from buying anything new for years, meal planned, got a second job for a while, but it was so worth it.

Good luck in your overpaying plans. Every £1 will make a dent in it compared to what was originally planned

I used to work as a mortgage advisor. If you are tied into a fixed rate you can pay 10% of your debt as an overpayment per calendar year. So if your mortgage is 100K you can overpay this year 10K and then on 1st Jan 2025/26/27 you can pay a further 10% of the outstanding balance.

Conventional wisdom is to keep about 6-month in outgoings as cash cushion in case of temporary loss of household income and the rest to deploy into stock and/or repayment of mortgage. If you are confident in the outlook of your financial situation it makes sense to fill up your 20k annual ISA allowances and to use the excess to pay back mortgage.

I overpayed the mortgage to the 10% limit each year. Some months were tricky but I managed not to miss a month.

Due to this we completely paid off the mortgage about 4 years ago. I have been putting what we did pay Into a high interest savings account and this will be a lovely nest egg when we retire.

It's an amazing feeling to completely own your own home :-)

We currently don’t have a deal, we’re on the variable rate, and we are aggressively overpaying our mortgage. I am expecting it will be paid off in the next 3-6 months, which will be such a nice feeling.

I'd like to join! I'm on an interest only mortgage but overpaying each month. It has 15 years to go - my aim is to overpay as much as possible over my current 5 year fix and then when it's up convert my interest only mortgage to capital and repayment for another 5 years and be done with it. £115k to go, overpaying £350 a month and lump sums when I can.

I feel like I am getting obsessed with it. It is on my mind all if the time! I need to pay just under £3000 to get to another milestone in the pay off. I hope I can do that by end of Jan 2025.

Oh and interest only makes me feel really anxious!