Mortgage FREE by 2018

justinj

Hi all I've been a great admirer of the site for a long time and have finally taken the plunge to get involved. I'm self employed and began a mortgage with my girlfriend in July 2008. Our mortgage is interest only at 6.99% for £144,000.00. Our monthly payment is £840. The mortgage rate of 6.99% is fixed until July 2011 then changes to 2.5% above the current bank rate. The house would currently be valued at roughly £160,000.00. My question is would it be better to overpay (my mortgage company will allow £500 extra a month) or save the money? Your help, wisdom and expertise would be gladly welcome .

pawlala

Hi! welcome

Unless you can get a better rate of interest in your savings account than 6.99% (unlikely) then it is better to OP than save. Very basic advice and there are many things to consider (emergency back up saving etc) but that is the bottom line

dimbo61

If you can overpay for the next 18 months by the £500 a month this will help when you come to remortgage and hopefully get you a better deal because you will have more equity in your property.
Build up 6 months of emergency savings as well ! GOOD LUCK

justinj

Right I'm going to make my first overpayment of £500 tomorrow. Thanks for your comments watch this space!!!!!!!

justinj

made my first overpayment today!!!

dimbo61

Good for you 17 more and thats £9k plus all the interest saved off the mortgage debt !!!

dimbo61

If you can keep up the OP,s and that plus the decrease in the mortgage balance between now and July 2011 would mean you are looking at 75% LTV deals when you come to remortgage!

justinj

Hi there i've been in touch with my mortgage company today and they have informed me that they can charge 2% of what i overpay. They haven't this time but they have the power to do so, but I can overpay as much as I like. I'm a bit confused. Is it still worth overpaying or saving as much as possible and paying a lump off at the end of the agreement with no charge. Please help many thanks

Queen-Bee_2

Hello Justin, you confused me for a moment your diary thread has the same name as mine. However, hello, welcome and good luck with your journey!
Queen-Bee

Queen-Bee_2

LOL... hello again, I see you've just changed the name!

Re the overcharge , have you thought about officially shortening the term? I wanted to pay more of my mortgage off than I was officially allowed to (I am on a fixed rate till 2011 and can't pay off than 5% pa till then), but when I enquired, Nationwide was prepared to allow me to shorten the term, which automatically put the monthly payments up. When I want to pay less, I can re-extend the term. I won't be charged any admin fees for doing this.

Obviously this is no good if you want to build up an overpayment reserve, cos once it's paid, it's paid, but otherwise, it's useful to know!
QB

justinj

Hi all changed over to repayment today the mortgage is now £1039.55 a month :eek:, waiting for confirmation on whether the mortgage company are going to charge me 2% on what I overpay!