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    • anmadogo
    • By anmadogo 12th Jun 17, 4:01 PM
    • 14Posts
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    anmadogo
    Overpay mortgage
    • #1
    • 12th Jun 17, 4:01 PM
    Overpay mortgage 12th Jun 17 at 4:01 PM
    Hi everyone,

    Hope you can help, word of warning: I'm not great with numbers so sorry if I'm asking obvious questions.

    My current fixed rate repayment mortgage (3.99%) is going to expire at the end of August, when I'm due to start on a new 5 year fixed repayment mortgage (1.99%)

    I am about to transfer some money from expired cash ISA's into premium bonds (they quote 1.15% average return) but before I do that am wondering if I should use some of this money to pay off the mortgage and whether I should do this before the current one expires and/or make monthly overpayments on the new mortgage.

    Hope this makes sense,
    Many thanks in advance!
Page 1
    • AnotherJoe
    • By AnotherJoe 12th Jun 17, 4:28 PM
    • 7,051 Posts
    • 7,518 Thanks
    AnotherJoe
    • #2
    • 12th Jun 17, 4:28 PM
    • #2
    • 12th Jun 17, 4:28 PM
    How much are you putting into your pension?
    Are you a high rate taxpayer?
    • anmadogo
    • By anmadogo 12th Jun 17, 4:41 PM
    • 14 Posts
    • 0 Thanks
    anmadogo
    • #3
    • 12th Jun 17, 4:41 PM
    • #3
    • 12th Jun 17, 4:41 PM
    Hi AnotherJoe, thanks for your response. I'm a basic rate tax payer, with a NHS pension of about £100 a month.
    Thanks
    • AnotherJoe
    • By AnotherJoe 12th Jun 17, 5:07 PM
    • 7,051 Posts
    • 7,518 Thanks
    AnotherJoe
    • #4
    • 12th Jun 17, 5:07 PM
    • #4
    • 12th Jun 17, 5:07 PM
    £100/month isnt a lot. I take it thats the statutory amount the NHS takes? Its probably worth £200 a month compared to a private scheme but even so you might want to consider paying extra to a private scheme.
    Regards your mortgage, paying off the lump sum gives you a guaranteed no risk no tax 1.99% return, eg pretty much double PB's* and since you are obviously extremely risk averse (5 year mortgage term, PB's, cash ISAs) that ought to fit your mindset.
    You do though lose the flexibility of having that money should you need it for emergencies so if you dont have an emergency fund leave some put by for that.

    Given your fixed rate most likely has an early repayment charge and you are so close to it ending anyway, I would wait until the new mortgage starts. So suppose you owe £100k and the PB's are £25k, take out a £75k mortgage.


    * Since the PB return is overstated since it includes prizes you are extremely unlikely to see.
    • anmadogo
    • By anmadogo 12th Jun 17, 5:45 PM
    • 14 Posts
    • 0 Thanks
    anmadogo
    • #5
    • 12th Jun 17, 5:45 PM
    • #5
    • 12th Jun 17, 5:45 PM
    Thanks for the advice! Yes it is the statutory pension, I hadn't considered private pensions, I'll have a look into it.

    And you're dead right, I'm risk averse as I'm relying on my sole income which is pretty low and making sure I can pay the bills/mortgage etc. So it makes sense to make a smaller overpayment and allow for emergencies, thanks, I'll do that.

    I take on board what you said about PB's, I only considered it as I was advised to instead of ISA's, do you have any recommendations instead?

    Thanks
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