How to Over Pay - Should I?

dimbo61

You need an emergency fund in cash ISA,s of 6 months of income first.
Second you need to overpay on the mortgage as you are allowed up to 10% a year of the outstanding balance at the start of each year ( mortgage statement But check with lender quick phone call )
When you have paid off your car loan use that money to overpay mortgage !
Isa rates will drop to less than 6% but as i said you still need a savings pot.
As you are fixed and earn £51k a year with no kids YET then overpay,overpay and overpay
This will clear some of the debt and build up more equity in your home which will less interest paid and a bigger deposit for your next home
Aim to overpay by £500 a month You can do it
Cut out the SKY,nights out,takeaways, expensive holidays etc
GOOD LUCK on your MF journey

Ed_Zep

Firstly, well done to both of you for getting on the house ladder at such a young age.

I like overpaying. It's a nice feeling to see the outstanding balance reducing each month. I just send the building society a cheque when I feel like it. Some people keep the payment the same, I let mine reduce and pay more when I feel like it. As long as I average my target overpayment throughout the year, I'm happy.
It depends on your bank but I would imagine they would let you overpay irregular amounts. You might want to give them a call anyway.

Also, investigate getting a cash ISA. More so when the savings rates rise.

If you need some inspiration. Check out this overpayment calculator to see how even a small amount will reduce the term of your mortgage.

http://www.jeacle.ie/mortgage/uk/

Obviously, always keep money back in case of a leaky roof or a broken boiler and generally to have fun!

Best wishes.

Ed.

Swans1912

That calculator has definitely inspired me!

If we could manage £500 extra per month I could have the thing paid off in around 12 years! We will be in a position to start doing this sometime next year depending on keeping our spending under control... within reason.

I'll be speaking to my Mortgage Advisor first and after confirming I wont be charged for making overpayments (within that 10% limit) I WILL set up a £50 - £75 (Per Month) over payment to set things off! I know it is not much but it is a start ready for the hard core overpayments next year!

Lokolo

iKennett wrote: »

That calculator has definitely inspired me!

If we could manage £500 extra per month I could have the thing paid off in around 12 years! We will be in a position to start doing this sometime next year depending on keeping our spending under control... within reason.

I'll be speaking to my Mortgage Advisor first and after confirming I wont be charged for making overpayments (within that 10% limit) I WILL set up a £50 - £75 (Per Month) over payment to set things off! I know it is not much but it is a start ready for the hard core overpayments next year!

By the way - I aim to get a mortgage at 25 and pay it off by 30... But that is with a nice deposit. I am aiming for £120k flat/house. £45k deposit, so get a mortgage of around £75k. With me and my partner, should be able to pay off £15k a year! Obviously if we are allowed.

- but thats counting on I get my placement year with IBM and graduate with IBM (on £29k ), so a lot of work to be done!

StuartGMC

iKennett
The basic principles extolled above are the guidelines we run with here in the MFW board; the degree to which you apply them is then down to you. Read through the different threads and you'll get a flavour of what range of drivers we have, all leading to the common goal of that MF date. In our case we've balanced our OP with fun, some reasonable comfort, foreign holidays, I'm still running my 3.0L S-Type Jaguar as it is my "reward" for getting where we are today etc but we seem to be close to clearing a 25yr mortgage just over 9yrs early.

I would recommend that you get your detailed household expenditure pinned down so you know your regular commitments (annual and monthly) for purchases, insurance, holiday and saving for the next cars (make a promise now not to have car loans in future!), maintenance etc. Allow for annual amount to cover decorating etc.

Then start measuring your expenditure on groceries, shoes & clothing, petrol plus what "allowance" you can permit for the pub/club/restaurant each month - you're young, ensure you do enjoy life too!

Consider then your replacement purchases over the future years; new TV every 8yrs, pc every 3-4, white goods etc

What work will be needed on the home; double glazing, new bathroom, kitchen, soffits & guttering.....

Build up the 3-6months income/expenditure emergency funds

I assume you have pensions with the company or that you have started them privately?

Now you will know your costs and your baseline you should be saving each month so you will be buying things for cash in future...

Then consider what's left, as this could be your overpayment.

A spreadsheet will really help you on this.

Always assume costs will rise and your salaries won't, then you'll be conservative in your planning.

Think about the possible future reduction in salary; if you have children then one of you will likely at least reduce hours plus you'll have extra child care costs to manage. This is a major impact as it reduces your disposable income significantly, as much as 50% in our case.

As noted, ensure you have an ability to manage a period of unemployment....

I would personally recommend 3, 5 and 10yr plans that you review together formally over time. Treat them a bit like the work appraisal reviews, have some interim goals financially and personally, then you will very likely improve upon them, rather than have some vague concept of 15-20 yrs hence.

HTH and good luck in developing your detailed plans; I look forward to reading of your progress.

firesidemaid

just a thought (or several;)) about the comment you made re. public transport for your OH costing more - costing more than just petrol or the whole caboodle?

car loan + petrol + car tax + car insurance + mot + maintenance/servicing + rescue/recovery service + depreciation/saving for replacement car!

what type of public transport could she get? have you looked at the cost of annual passes? interest-free season ticket through your employer? if bus travel, you might also save tax on this too.........

Swans1912

firesidemaid wrote: »

just a thought (or several;)) about the comment you made re. public transport for your OH costing more - costing more than just petrol or the whole caboodle?

car loan + petrol + car tax + car insurance + mot + maintenance/servicing + rescue/recovery service + depreciation/saving for replacement car!

what type of public transport could she get? have you looked at the cost of annual passes? interest-free season ticket through your employer? if bus travel, you might also save tax on this too.........

Fair point... Something to think about however it is not practical. I would like to do this but don't think I could talk the OH into it.

firesidemaid

iKennett wrote: »

Fair point... Something to think about however it is not practical. I would like to do this but don't think I could talk the OH into it.

it would be interesting to see how much it would save and put it in the overpayment calculator!

it all depends what you are working towards and what you are prepared to give up vs not.

i am slightly;) older and i want to be mortgage free so i can do a less demanding job and start my own business - ie. downsizing my job