MFW advice please!!

first78

Okay so I'm hopeless at understanding almost anything financial...I do however know that my mortgage is the biggest debt I have and life would be considerably easier if I was mortgage free...so here's my situation:

I am currently on a 3 year fixed rate mortgage owing £58,500. My fixed rate is 4.99% and I pay £395.98 per month.

My mortgage conditions state I can overpay 10% of the outstanding balance per year.

How much does this mean I can overpay by per month? How can I be mortgage free??

MrC-117

Roughly - 10% of £58,500 is £5850, or £487 a month. A year in a mortgage will depend on the date you took out that mortgage, so if you took it out in February one year and started overpaying now you could pay a bit more in (6 x £487 for the 6 months of the 'year' you've not overpaid in yet).

Then next year that amount would be slightly less as you'll only owe about £50,000 so they'll only let you overpay £5000. You'll have to check with the mortgage company for exact figures. The mortgage company may have rules about if you can only pay in a certain amount each month, or a big lump once a year, etc.

If you have more money left over you can save it until the fixed rate ends and pay off a lump sum without any penalties.

Also, make sure you have some savings in case of an emergency, etc.

Ma77hew

In addition to the above if you can pay a set amount each month then you could consider changing the term of your mortgage so the monthly payments increase.

My lender charges £10 to change the term.

ironman1

This may sound a silly question, but we are 21 and are paying over 40 years but overpaying a few hundred a month at the moment. Would we better changing it to say 25 years or carrying on as we are? Basically, what is the difference between the two?

barnaby-bear

s.h.m.w wrote: »

This may sound a silly question, but we are 21 and are paying over 40 years but overpaying a few hundred a month at the moment. Would we better changing it to say 25 years or carrying on as we are? Basically, what is the difference between the two?

Stick with the longer term and just make sure they don't adjust payments down to keep it at 40 years when interest rates change etc.... it'll make no difference (except to what you can overpay - as salaries go up you may find limited in overpayments) but changing to 25yrs will commit you to the higher payments which probably isn't a good idea until you are certain of jobs, babies and how MFW will work for you...