Mortgage Overpaying Rises at the banks

StevieJ

Lotus-eater wrote: »

This is what I disagree with, if I bought a plot of land for £20k and built a eco house from straw bales, I could build it for virtually nothing, I wouldn't have a mortgage. Because I choose to live in this (nice) house, it means I do. Therefore I am borrowing to pay for a std of living. (planning permission aside for one minute)

It was my personal choice and made for a variety of reasons, which I won't bore you with, or indeed go into them on the net.

I actually think we have been brainwashed into thinking that a mortgage is a daily charge we must pay all our working lives.





You make some very good reasons to not pay off a mortgage and I agree with you, I just repeat again, for us it was the right thing. I feel much happier as well

I paid nearly all mine off a couple of years ago and I am well hacked off, it is costing me money. I could have put that money into a long-term fixed savings rate at the bank and been better off, oh for 20/20

IveSeenTheLight

cogito wrote: »

27000 isn't all that many though and G*rd*n Br*wn wants us to spend our way out of recession.

A friend of mine whose mortgage is over £300 a month less than it was 6 months ago hasn't a thought of overpaying and views it as more to spend on holidays. He just doesn't understand that he could be in negative equity before long.

27,000 request since November is quite a high number I would have thought.

I've been overpaying for years now, so there are probably a lot of others like me that overpay but don't fall into the "since November" statistic

IveSeenTheLight

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.

Got to disagree with a lot of the above.
I have an ERP of 2% on one of my mortgages, up until last month when the mortgage interest rate went down to 1.76% it was financially beneficial to incur that penalty as I was still saving.

When the interest rate was up circa 5%, by incurring the 2% ERP I effectively recouped the penalty within 4 months of interest payments

So I would advocate to not be scared of ERP, check out the figures, how much a penalty you will have and how much interest you save per month.
The benefits may be a little less with interest rates so low, but you may be surprised the benefits you could receive.

In short, a good quick guide is to first check if your ERP is less than your mortgage interest. If it is, you will be saving money long term and reducing your amortization period if you pay the penalty and reduce the mortgage debt

Lotus-eater

StevieJ wrote: »

I paid nearly all mine off a couple of years ago and I am well hacked off, it is costing me money. I could have put that money into a long-term fixed savings rate at the bank and been better off, oh for 20/20

Hindsight its a wonderful thing.

Don't be hacked off, its only money.

Squish_21

When we drop to the SVR rate in March we will be overpaying £170 as we have decided to carry on paying what we did on our fixed rate. Trying to reduce the negative equity if poss!

BlondeHeadOn

Gorgeous_George wrote: »

My parents have never been 'rich' but I remember having a summer holiday every year. All but one in the UK and one year, it took over 24 hours to reach Cornwall.

GG

Yes, we had a car like that as well when I was young!

It was a real 'family car' - my Dad had to take the whole family with him when he drove it anywhere, so he had extra hands to help him push it back when it broke down!

Happy Days....

:rotfl: :rotfl: :rotfl:

Ilovejackbauer

Our ltv on our house is on about 33% but we have a btl which is probably in negative equity now (bought for 175, mortgage 151 not sure what its worth now). On btl we are on NR SVR but on our house we are fixed @ 5.89 for the next four years with Bank of Scotland. I want to get a tracker from First Direct which was I think 1.89% above base rate making a rate of 3.49%. We would have to pay a redemption of £4k. We don't have massive savings but between us earn approx £3 - £3.5k per month.

I know its a gamble and rates may rise but I would be interested in your thoughts

I meant to say I wanted to a tracker that was linked to savings and bank accounts

WTF?_2

Ilovejackbauer wrote: »

Our ltv on our house is on about 33% but we have a btl which is probably in negative equity now (bought for 175, mortgage 151 not sure what its worth now). On btl we are on NR SVR but on our house we are fixed @ 5.89 for the next four years with Bank of Scotland. I want to get a tracker from First Direct which was I think 1.89% above base rate making a rate of 3.49%. We would have to pay a redemption of £4k. We don't have massive savings but between us earn approx £3 - £3.5k per month.

I know its a gamble and rates may rise but I would be interested in your thoughts

I meant to say I wanted to a tracker that was linked to savings and bank accounts

I don't think that rates will stay low for much longer than 18 months - maybe 24 months. Plus, current trackers are priced quite high above base (compared to before the rate slashing began) and often attract a hefty 'arrangement fee' on top of that redemption fee you'd be paying on the existing mortgage.

Based on that scenario of higher rates playing out, if I were you I'd stay on the fixed rate for your house and I'd keep an eye out for a decent low-rate fix on the BTL.