Mortgage Overpaying Rises at the banks

thriftybabe

Best thing we ever did! It is a great feeling. We still budget and save the amount that we would have put into our mortgage. Albeit the next few months we are going to have a drop in our income so I doubt we will be able to continue to do so. At least I can sleep at night not worrying about the mortgage.

lana22

WestonDave wrote: »

Lana - there are a few things you need to watch out for when overpaying. Firstly that on a new mortgage there are often limits on overpaying and if you exceed them you get penalties which outweigh the savings. Alternatively some lenders still calculate balances annually so again making overpayments doesn't have any immediate effect. The remedy for both is to put the money in a savings account ready to use when you can overpay, but obviously at the moment savings rates aren't that great.

As for £300 a month - if you come on over to the Mortgage Free part of the forum - go back to the main screen and its about the 6th from the top, you'll find links to various calculators (often referred to as snowball calculators) that will show the benefits of any overpayment. In short however anything you overpay (especially early on) will have an impact on the interest you pay. The earlier you make the overpayment, the bigger the impact as that's potentially 25 years interest on your £300 you've saved.

Thanks very much for your reply. I will go to the calculator and have a look.
Our overpayment limit is 10% per year, until our tracker runs out (in 3 years time) Our mortgage is approx £110k, and it is unlikely we would have the cash to pay back over £11k this year (sadly!).
If in the next couple of years we do have more spare cash, we will save it, then pay off a lump sum after the deal runs out.
We had thought of putting it in a savings account, but it was difficult to find a good rate, and it was just so simple to put it in the mortgage that we decided to just overpay for simplicity.

Thanks again for your reply.

lana22

lana22 wrote: »

Thanks very much for your reply. I will go to the calculator and have a look.
Our overpayment limit is 10% per year, until our tracker runs out (in 3 years time) Our mortgage is approx £110k, and it is unlikely we would have the cash to pay back over £11k this year (sadly!).
If in the next couple of years we do have more spare cash, we will save it, then pay off a lump sum after the deal runs out.
We had thought of putting it in a savings account, but it was difficult to find a good rate, and it was just so simple to put it in the mortgage that we decided to just overpay for simplicity.

Thanks again for your reply.

WOW! Have just done the calculator thing, if I repay £300 a month for the term of the mortgage (which i should be able to do easily as my wages rise very quickly), I will repay in 13 years instead of 25! Which will mean I will be 36 when my mortgage is paid off. Although really I should be able to make lump repayments when my wages go up, so hopefully should have it paid off even quicker. Mortgage free by the time I'm 30 sounds nice!

mr_jetlag

:hello: Another overpayer since the rates have started going down. We did "treat" ourselves by lowering our payments for 1 month (and using the money to travel), but have since put them back up to the pre-apocalypse level.

Early overpayments are actually great. In a repayment mortgage the highest interest payments are at the beginning of the term. By overpaying as much as you can without triggering penalties, you are reducing the interest on succeeding years.

YMMV but I suggest having a face to face with your bank or BS on this to make sure you don't trigger any funny clauses in your T&Cs.

Thrugelmir

In all the gloom this is a ray of sunshine for many mortgage holders. We too are maximising our mortgage repayment by continuing to pay the original amount. Our reason is not only to repay the mortgage quicker, but the envitable tax increases and interest rate rises every day get closer and closer. Thereby giving us financial flexibility in the years to come.

kennyboy66_2

Would not entertain overpaying this year.

Lumping it into pension.

StevieJ

kennyboy66 wrote: »

Would not entertain overpaying this year.

Lumping it into pension.

Market at 4000 and tax relief of 20% or 40%+, you are one smart guy :T

BlondeHeadOn

setmefree2 wrote: »

Well done on that . You should come and join us the MFW board for the rest of your journey......There is a Mortgage Free Roll of Honour also - for when you are completed.

I might well do that - having discovered how good it feels paying off a large chunk of the mortgage.

We do have the advantage of have a fully flexible tracker - so we can pay off however much we want without being penalised. Also the overpayments are kept in a large 'pot' by the Nationwide, which reduces the balance of the mortgage BUT is also available for us to draw out again if we ever need to access the funds. It's a good system for us, especially with savings interest rates the way they are at the moment.

I've never been an MFW before.... but it's nice!

Thrugelmir

StevieJ wrote: »

Market at 4000 and tax relief of 20% or 40%+, you are one smart guy :T

Which way is the market heading though????

Better LTV could mean much better interest rate for some in the future.

StevieJ

Thrugelmir wrote: »

Which way is the market heading though????

Better LTV could mean much better interest rate for some in the future.

Market should trade 3700 - 4500 for a couple of months and then start to make a move March - April, assuming that the recession starts to ease Q4 which is the current ETA, could all change though You pays your money and take your choice.