£500 lumps sums or more regularly?

Kantankrus_Mare

Reading some of these threads on this board, I realise that we are in a relatively lucky position of having a mortgage of £32,000.

Its all relative though and after Ive paid some debts off I'd like to be mortgage free as soon as possible to free up some cash.

We are with the Nationwide and have approx. 10 years left to go.

My query is this:

With the Nationwide, any sum of £500 upwards gives an immediate drop in monthly payments which is what I would like initially until I feel the mortgage is at a comfortable amount (for us)

Should I save till I have the £500 or pay bits off as we have it available?

Any advice would be appreciated.

Barneysmom

Hello, love your name!
I'd elect to make regular overpayments of the same amount each month for a bit, then see where you stand, say, after this Christmas, and maybe up the payments again?
I think it will depend on how high the interest rate is, wether you save it up in a bank or pay extra off.

abouttimetoo

Hi Kantankerus Mare (love the name too!)

I think it depends on a couple of things

What the interest rate is on your mortgage e.g. can you earn more interest on your money in a savings account/isa etc than you are paying interest

How your interest is calculated on your mortgage - if it's daily then it might be better paying off smal sums rather than waiting until you have the £500

Kantankrus_Mare

Thanks for replies.

I will have a lump sum of £500 just after Christmas so I think I will pay that off the mortgage and see how much it saves.

My plan was to try and make 2 to 3 lump sums like this a year until I get the monthly payments down to below £300. (We currently pay £360 a month and we are on the standard variable rate)

Once the monthly payments are lower I hope to pay off some weekly as interest is charged daily and therefore in theory knocking off a bit of the length of the mortgage.

Don't know if Im making much sense :rotfl:

zekepes

I don't know about the nationwide but with egg you can only pay off a minimum of £500 in a lump sum payment. You can though pay a regular overpayment. I would be quite surprised if they allowed you to pay off non-regular small amounts because of the admin costs.

Really, you just have to find what you are comfortable with.

We pay a set amount each month which is above our regular amount. Then we make lump sum payments every January and July depending on what extra we have managed to save in that time (assuming it is above £500). It may not be the most efficient way of doing it but it is what we are comfortable with.

I know you said you wanted to get the actual payments down but you can overpay on a regular monthly basis and stop that whenever you want to. Personally I would pay a fixed amount of £400 a month towards your mortgage and then save any extra money you have spare until it reached £500.

We have just come to that conclusion anyway (to do both) as although on paper we could afford to pay a higher monthly sum than what we are doing I didn't want to commit anymore on that basis.

dimbo61

The SVR at Natinwide is 6.49% at the moment ?
The best you can get at the moment is 6.5% from an ISA ( barclays/ lloydstsb) TAX free.
There is also halifax 10% regular saver BUT you have to save for a year and its only 8% after tax.
So you may as well just pay what ever you can off the mortgage and it will
reduce your mortgtage payment once you reach £500.
Keep up the good work