Help; in a dilemma!

dimbo61

If you are happy with the house and area I would stick it out and save into ISA,s and overpay a little if you can. Say 50/50
You have security with your fix for another 3 years and who knows what rates will be next year never mind 3 years time !
Dont pay an ERC of £4500 and only spend what you need to spend on the property IE no flash new kitchens /bathrooms unless you have no kitchen or bathroom.
GOOD LUCK

BenC_2

We can stay here for another 4 years or so thats not a problem then when we have the money for a big deposit we will move, looking at the saving vs mortgage overpayment read up it seems that the best savings I could go for would be 3% over the 6.99% interest rate on the mortgage.

So with thes figures I am advised to overpay the mortgage, I will find out from Northern Rock how the interest is calculated and also make sure the overpayments go towards paying the capital.

Is it still worth putting some money aside in an ISA somewhere also?

Berkshiregirl

You might find this link encouraging:

http://www.whatmortgage.co.uk/calculators/fleximortgage.html

You can see the effect small overpayments early on in your mortgage term can make - quickly reducing the overall amount owed.

BenC_2

Hi thanks for the link it helps a little, is there anyway to calculate if I overpay by £300 a month for the next 4 years how much will be left then to give me an idea?

Joe_Bloggs

I used locoblades mortgage calculator spreadsheet 1.8 (Mac version) with the calc application of OpenOffice.org 3.1.1 (windows version). This allows a comparisons to be made between mortgage situations. I could only get £119,000 with a monthly payment of £794.95 @ 6.99% to be a term of 29 years 6 months. The first situation involves no overpayments the second situation involves an overpayment of £300 a month.

The difference in cost of the mortgage upto the end of the third year (48 months) is £14400. The overpayment case being £300 x 48 months more expensive. This gets you a capital outstanding position of £96,826 when compared to £113,386 a difference of £16560. The difference between the two mortgages appears to be £2160 in favour of the overpayment case.

This neglects the interest that could have been earned on the overpayment money were it placed in an interest paying account such as a regular saver. You would need to get 8.74% gross for a basic rate taxpayer or 6.99% in an ISA to match the overpayment case.

The comparison ends after 14 years and five months as the overpayment mortgage has been paid. In the other case there is still £89K left on the mortgage

J_B.

BenC_2

Thanks JB that gives me an idea on what the capital would be like when i come to sell the house which is alot better than what I thought. Are there any high interest savings account available to get 8% on savings or would the over payment be the sensible option?

Joe_Bloggs

MSE Martin keeps tabs on the current savings situation here. There are other sites that specialise in comparing rates. If any account offered a true 8% then they would be engulfed by a deluge of money that they could not possibly deal with.
J_B.

BenC_2

Ok no problem I think the best option then is to overpay the mortgage by as much as I can per month and keep track of it using that spreadsheet in the previous thread.

I have also been speaking to my other half who is also thinking about going back to work part time when my parents can look after the baby so costs are minimal, we'll probably put her wage into an ISA so we have some cash to fall back on if we need it.

Thanks for all your help everyone I have learned quite a lot from here and really appreciate it

Joe_Bloggs

The best savings rates are often for regular amounts or at least a regular commitment to save something. The best ISA rates are often for a fixed term for a fixed amount. Thus you can't invest anymore than a lump sum and you will take a penalty if you take out the money before the fixed term ends. Sound familiar ?
J_B.

BenC_2

I think then the best option would be use my money and the money from my small business to overpay the mortgage and when my partner starts working again get her income into a fixed ISA for the closest amount of years we have left here till we move