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  • FIRST POST
    • YoungGentry
    • By YoungGentry 8th Jul 17, 9:32 PM
    • 17Posts
    • 2Thanks
    YoungGentry
    Is over-payments the best option?
    • #1
    • 8th Jul 17, 9:32 PM
    Is over-payments the best option? 8th Jul 17 at 9:32 PM
    Hey Fellow Savers,

    Need a little bit of advice. I am in a position to do the full 10% overpayment on my SO flat in Croydon. This was always the plan, however I am not so sure if it is still the best option.

    I have had the property for almost two years and hope to sell it and get a flat in more central location in three years.

    It is 35% SO on a 210k one bed flat, ~50k mortgage left.

    With Westfield on the horizon, the value of the property has already increased by 30-40k (based on neighbours selling).

    What do you think?

    Edit: Mortgage is a 4 year fixed rate @ 2.9. No rate of saving is higher than the cost the debt. Pensions is a pre tax deduction with my employer.

    Kind Regards,

    Gentry

    Last edited by YoungGentry; 08-07-2017 at 10:09 PM. Reason: Update based on zx81 comment
Page 1
    • zx81
    • By zx81 8th Jul 17, 9:48 PM
    • 12,511 Posts
    • 12,673 Thanks
    zx81
    • #2
    • 8th Jul 17, 9:48 PM
    • #2
    • 8th Jul 17, 9:48 PM
    If the mortgage rate is more than the savings rates, and there are no other considerations such as pensions, then maybe.

    Nothing in your OP is relevant.
    • YoungGentry
    • By YoungGentry 8th Jul 17, 10:01 PM
    • 17 Posts
    • 2 Thanks
    YoungGentry
    • #3
    • 8th Jul 17, 10:01 PM
    • #3
    • 8th Jul 17, 10:01 PM
    If the mortgage rate is more than the savings rates, and there are no other considerations such as pensions, then maybe.

    Nothing in your OP is relevant.
    Originally posted by zx81
    Thanks for your comment, hopefully my edit added the detail required.

    If not, please advise.
    Last edited by YoungGentry; 08-07-2017 at 10:09 PM.
    • Thrugelmir
    • By Thrugelmir 8th Jul 17, 10:30 PM
    • 54,345 Posts
    • 47,165 Thanks
    Thrugelmir
    • #4
    • 8th Jul 17, 10:30 PM
    • #4
    • 8th Jul 17, 10:30 PM
    Do you have an emergency savings pot? If so, then overpaying the mortgage is a good suggestion. As reduces the interest you'll pay and increases your equity. The amount of equity you have towards the next purchase may well help you obtain a better interest rate. Every little bit helps. Worth taking the long term view. Even if the initial return seems low.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • YoungGentry
    • By YoungGentry 8th Jul 17, 11:19 PM
    • 17 Posts
    • 2 Thanks
    YoungGentry
    • #5
    • 8th Jul 17, 11:19 PM
    • #5
    • 8th Jul 17, 11:19 PM
    Do you have an emergency savings pot? If so, then overpaying the mortgage is a good suggestion. As reduces the interest you'll pay and increases your equity. The amount of equity you have towards the next purchase may well help you obtain a better interest rate. Every little bit helps. Worth taking the long term view. Even if the initial return seems low.
    Originally posted by Thrugelmir
    Yes, equivalent to 6 six months of bills just in case. Thanks for comment, I will crunch the numbers to what the equity return will be in different scenarios.

    Edit: So I crunched the numbers, the difference in equity profit is as follows, with vs without overpayment - Sell in 2019 4.6k, 2020 6.4k, 2021 8.6k.

    These number beg the question if buying the other 65% actually provides the best option and the most flexibility.
    Last edited by YoungGentry; 09-07-2017 at 9:35 PM. Reason: Added the figures
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