AM i allowed to overpay?

getmore4less

mrsmasterplan wrote: »

My mortgage is with NatWest - I do not know if it is fixed or not??!
I have left the finer details to my dad as he knows which is the best for me -

I could not tell you where the extra money goes, but it definitely does work out more if you choose the repayment method rather than interest only and then overpaying.

We worked out repayment costs around 300 more a month, but that 300 does not all come off the total amount borrowed.

The interest is 2.99% for the first two years and then goes up to 4% after (im pretty sure - do not have it to hand)

I was only posting this question to get an idea of what fines are out there and how much they are?
I wasnt posting for people to belittle me and tell me to 'get over it'
Im an excited and young first time owner, and trying to learn as much i can.

Surely thats a good thing?

You need to review your advisor your dad does not know as much about mortgages as you and he think

105k @2.99 25y look at the first payment on both an IO and repayment mortgage

interest only £261.62
interest £261.62

repayment £581.80
interest £261.62
capital £320.18

[Deleted User]

Hello MrsMasterPlan.
Just a few points regarding mortgages. Firstly, most sensible people get repayment mortgages. The idea of interest only + overpayment being cheaper is just plain wrong.
The second point is that people are not being rude. You are simply getting very direct answers to your questions. This is something that I personally value. No disrespect to your Dad but you need to get a second opinion.

Wutang_2

CR10 wrote: »

Hello MrsMasterPlan.
Just a few points regarding mortgages. Firstly, most sensible people get repayment mortgages. The idea of interest only + overpayment being cheaper is just plain wrong.
The second point is that people are not being rude. You are simply getting very direct answers to your questions. This is something that I personally value. No disrespect to your Dad but you need to get a second opinion.

What a load of rubbish - fair play.

[Deleted User]

Wutang wrote: »

What a load of rubbish - fair play.

I love this forum! :rotfl:

Kaz2904

Actually, I think that your Dad has kinda got it right here. IF you are able to overpay your mortgage then you could end up quids in.
I'm going on a rate of 2.99% for the whole mortgage (don't flame me!)....
If you go to www.whatsthecost.com you can run figures.
I worked out that with an interest repayment of £250 per month you would need a capital repayment of (£105000 / 25) /12 = £320. So, that would give you a repayment figure of £600 per month.
If you were able to do this, you would automatically reduce the interest you paid each month because the amount you owe would be decreasing (you need to check out when they recalculate your interest owed, some only do it at the end of each year, in which case you would be better off paying your money into a savings account until just before they were about to recalculate the interest payments).
So with this scenario, you would repay your mortgage about 6 years earlier. HTH!

Thrugelmir

Kaz2904 wrote: »

Actually, I think that your Dad has kinda got it right here. IF you are able to overpay your mortgage then you could end up quids in.
I'm going on a rate of 2.99% for the whole mortgage (don't flame me!)....
If you go to www.whatsthecost.com you can run figures.
I worked out that with an interest repayment of £250 per month you would need a capital repayment of (£105000 / 25) /12 = £320. So, that would give you a repayment figure of £600 per month.
If you were able to do this, you would automatically reduce the interest you paid each month because the amount you owe would be decreasing (you need to check out when they recalculate your interest owed, some only do it at the end of each year, in which case you would be better off paying your money into a savings account until just before they were about to recalculate the interest payments).
So with this scenario, you would repay your mortgage about 6 years earlier. HTH!

Why not just borrow the money over a shorter period? Lenders like 25 year terms as it maximises their profit.

getmore4less

CR10 wrote: »

Hello MrsMasterPlan.
Just a few points regarding mortgages. Firstly, most sensible people get repayment mortgages. The idea of interest only + overpayment being cheaper is just plain wrong.
The second point is that people are not being rude. You are simply getting very direct answers to your questions. This is something that I personally value. No disrespect to your Dad but you need to get a second opinion.

This is wrong, the best option, if you can get it, is IO with no overpayment penalties and overpay

It won't save you money over the equivilent repayment(or cost more) but is a lot more flexable.

getmore4less

Kaz2904 wrote: »

Actually, I think that your Dad has kinda got it right here. IF you are able to overpay your mortgage then you could end up quids in.
I'm going on a rate of 2.99% for the whole mortgage (don't flame me!)....
If you go to www.whatsthecost.com you can run figures.
I worked out that with an interest repayment of £250 per month you would need a capital repayment of (£105000 / 25) /12 = £320. So, that would give you a repayment figure of £600 per month.
If you were able to do this, you would automatically reduce the interest you paid each month because the amount you owe would be decreasing (you need to check out when they recalculate your interest owed, some only do it at the end of each year, in which case you would be better off paying your money into a savings account until just before they were about to recalculate the interest payments).
So with this scenario, you would repay your mortgage about 6 years earlier. HTH!

Repayment mortgages don't work like this

Boozer

So the question still remains about where this money disappears to, could it be the fact on when they calculate the interest, obviously the later they do that then the more you will pay, but i dont see that making too much difference.

Good explanation of repayment mortgage here: http://forums.moneysavingexpert.com/showthread.html?t=2333651&highlight=

mrsmasterplan

I've found the answers now ive had a browse through my mortgage..

I am allowed to overpay up to ten percent over 12 months without receiving an early repayment charge so can effectively repay £10.5 k back each year that will come directly off the capital balance.

Great news - so if i really try - i can be rid of the mortgage before the 25 years is up.

Does this mean though - that if the capital balance gets lower and lower, the interest rate will too as i assume this interest is proportional to the borrowed amount..?!