savings vs over paying mortgage

samaki

Hi All-

Just wanted to ask peoples opinions and advice on this (sorry if its a little elementary).

Bit of back ground first: My husband and I bought a house 3 years ago, our mortgage is for 127k. We are both employed in decent, secure jobs and have no kids or pets.
The house needs a little work and we do this when we have saved enough. Currently the its only the bathroom thats left and we have just over 2k saved for this purpose.

we are able to confortably pay the mortgage/bills/save about 250 a month and go out about as much as we like..(which isn't loads - but the point is that we don't sacrifice having fun..).

Neither of us have any debt and I was wondering once the bathroom is done we will have a few hundred pounds extra a month. We don't have much in savings (about 1k after the bathroom is done) and I was wondering at what point we start to look at overpaying the mortgage (we can do this without penalties.. i checked).
My dad reckons we should have 6 months bills/living expenses etc saved before we consider this..

what is everyones thoughts?
How much should you have saved up before you start looking at over paying the mortgage?

Thanks for any advice!

Welshlassie

I agree with your Dad, get 3-6-9 months income saved and then think about OPing your mortgage.

Jonbvn

I agree with your Dad also, but reckon on a year!

As a vehicle for your savings, have a look at opening a regular saver ISA. I know First Direct are offering 7% at the moment.

samaki

so aim for a years worth to cover bills/mortgage/general survival?
sigh.. doesn't look like i'll be overpaying for a while!
Thanks for the advice!

Welshlassie

samaki wrote: »

so aim for a years worth to cover bills/mortgage/general survival?
sigh.. doesn't look like i'll be overpaying for a while!
Thanks for the advice!

To help with the morale side of it why don't you overpay a little bit each month eg £10.

Every little helps

benbenandme

I agree with Welshlassie, maybe if you have a spare £300 each month perhaps put £250 into your emergency fund and the other £50 into overpayments, then gradually reduce the amount going into the emergency fund and increase the overpayments one, and as it starts building up interest too the emergency fund will get there quicker than you think

getmore4less

If you both work, what are the relative risks of being out of work

Both at the same time is worst case needing the full emergency funds.

If the risks of both at the same time are low then your emergency fund may be smaller initialy.

Do you have any insurances, likely to get redundancy payments this can also impact the size of the pot needed.

Also consider what the low spends footprint is, cuttiing back every thing non esential this will give you the target needed.

Remember reducing the mortgage reduces future spends.
Also if it is flexable mortgage it may be that you can claw back again this reduces the need to fund from saving on an income drop.

A 12months emergency fund could be a mixture of overpayments, savings,JSA, other benifits.

samaki

thats very helpful advice, thanks.
and yes, you are right, the chances of us both being out of work are pretty slim and we would both be in line for redundancy payments if that was the case..
i hadn't taken that into consideration.. or jsa,
thanks again!