Newbie Advice

BryanRFC1873

Hi there
i have recently found this website and am delighted that i did. Iam looking on advice on how to start bringing down my mortgage by paying it off sooner or reducing the term.
Iam currently on a 5yr fixed rate with abbey at 5.64% over a period of 35yr.
i currently have a balance of 76,000 where i am allowed to over pay.could someone help advise whats the best way to start by bringing this down?


thanks

Welshlassie

Firstly find out how much you are able to overpay by, some mortgages you can't, some max £500 per month, some 10% per year etc.

Find out when your interest is charged to your mortgage, daily, monthly, annually. For the Monthly and daily charge you should OP as soon as you can, annually you are better off saving up your OP's in a high interest account and lumping the total off just before the interest is calculated.

Work out how much you can afford to OP, set yourself a target, work through your budget to decide if there are any areas you can shave some savings off (car insurance, energy bills, grocery shopping etc).

call and speak to your bank asking how you can OP, some will take online transfers, some you have to send cheques, others you have to pay it in at the branch. Ensure they know you want to pay it off the capital and keep your monthly repayment the same (This way your monthly repayment will start OPing a little bit each month as well.)

Set up a diary and keep us informed on how you are doing.

Welcome and enjoy the addiction that being MFW becomes.

Thrifty_2

Welshlassie wrote: »

Work out how much you can afford to OP, set yourself a target, work through your budget to decide if there are any areas you can shave some savings off (car insurance, energy bills, grocery shopping etc).

Couldn't agree more i spent time checking over all my bills reducing them cancelling certain policies which were no longer needed or of any further beneifit to me, I already overpayed on my mortgage, but by going back and starting over i now over pay a further £60.00 a month.

StuartGMC

Bryan
Agree with both above, get a really good handle on your finances. Ensure you have your rainy day fund aside (3-6 months income or more if self-employed), then consider the returns you could get from Cash ISA vs overpayment. I found our spreadsheet for household budgeting really helped to increase focus, although we have overpaid since the mortgage started in 1994. This saved 3years at year 12 when remortgaging and we're hoping to pay off almost 9 years early. See my thread for comments on aspects we look at.

Good luck and do keep this going, a thread and input from others here is a great help to keep motivated and get good ideas!

dimbo61

hi bryan
As stuart has already pointed out you would be better off saving into ISA,s
If and this is a big IF you could save 2x£3600 into isa,s each year for the next 5 years you would have £36,000 plus interest at 6/6.5%
The rates on ISA,s are very good at the moment ! ( banks need cash ) so
consider filling ISA,s ( you and other half ) each year.
This is also the best place to build up your emergency fund/ retirement fund.
This would mean saving £600 a month but you would halve your mortgage in 5 years. GOOD LUCK

Sunny_Donny

Hi Bryan
Abbey is 10% overpayment per year depending on the type of mortgage you have - you will need to call them if you want to get banking information for banking to overpay on-line. They were very helpful when I rang them.

Optimisticpair

Welcome to the MFW [strike]madhouse[/strike] Bryan,
I'll warn you now this overpaying thing becomes addictive!
Good luck, let us know what Abbey says so that we can contribute ideas.