Mortgage paying advice please!!

MandyL_2

My first post and two big questions!!

At the moment we're trying to do our best to pay off the mortgage. Our monthly payments are £230 and we (sort of) manage to save £220 a month. When we have £500 saved up we send a cheque off to the mortgage company as a capital payment, we also ask to keep our monthly payments the same so in effect we end up making monthly overpayments too. Do you think it would be better to put that £220 saving straight into the mortgage each month rather than waiting for it to build up to the £500?

Ultimately we want to move house and I'm worried that as the house prices are going to increase, our 'dream' house will end up being unreachable. Would we be better making a move now, as a sort of stop gap, and then look at moving again in the future? Our house at the mo would probably be on the market for £150,000, but the ones that we would like are about £230,000. So would we be best looking at something at the moment for £180k, then step up again in the future? or would this just end up wasting money in fees? If we did do this, then we wouldn't be able to save as much and pay the mortgage off like we are doing now. So should we wait until we've paid off our house (likely to be many years yet) or should we just bite the bullet and go? Arghhhh!

Any advice appreciated please.

cattie

Your monthly payments are very low now & likely to rise significantly with the more expensive house you desire. It's quite a leap you are thinking of taking & you have to bear in mind that for some time now we have had very low interest rates & work out you would manage if interest rates were to rise sharply in the future. I'm old enough to remember the interest rates of 15% back in the early 90's. :eek:

You don't say what your outstanding mortgage amount is or what how much income you have coming in & these details may help those in the know to give you more constructive advice.

Unless you have a valid reason for moving soon, such as desperate need for more space or due to new job location, it doesn't seem sensible to be considering it as a stop gap, to use your terms. Moving is terribly expensive & unless it is essential at the moment then the money is best used to reduce your existing mortgage or to be put into savings towards when you do eventually move.

I pay my mortgage by standing order as opposed to direct debit, which gives me the ability to adjust my monthly payments for overpaying the mortgage. I do overpay a regular monthly amount, but also occasionally make lump sum overpayments too. You would save interest by making your overpayments each month rather than waiting for it to reach a figure of £500.

Will.Power_2

Paying extra into your mortgage is a great way of reducing the term, but whether it's better to pay a little and often, or save up lump sums depends on how and when your lender calculates the interest.
Some have "annual rests", which means they only change the amount on which they charge interest every year. In this case, unless each over-payment is made as a 'part-redemption', it won't affect the interest until the end of the lender's year.
If this is the case, it's better to save elsewhere, gaining interest, and make the repayment just before they re-calculate. If you're actually making part-redemptions and they're not charging any fees for this, carry on as you are.
As for moving up-market, there are so many considerations, only you will know whether it's a safe thing to do. Just remember that the extra payments you're making voluntarily now will have to be paid come Hell or high water for the next 25 years if you take on the bigger mortgage. As long as your dream home is worth this…
(I increased my mortgage by two and a half times five years ago to get our 'dream' home; mostly I'm glad I did, sometimes I think about what else we could spend the money on each month. But I do know that if we hadn't done it then, we couldn't afford to do it now.)

MandyL_2

Thanks for your replies. Our outstanding amount is £34k with 16 years left to run. We've managed to pay off 6k in just over a year but I don't think we will manage the same in the coming years! We started doing the saving £220 bit last year when we looked at moving and thought it best to see if we could live without the extra money! Mostly we can but it does get a bit tight sometimes. Luckily though, we don't have any credit cards or loans. We live on my hubbys income of £22k whilst I stay at home and look after the kids. We would like another child but would definitely have to move.

So, do you think we would be best to sit tight and not bother moving up slightly? I think we thought that if we did move up then hopefully that next house would go up in value and helpbridge the gap to what we really want. All I'm thinking is that if house prices go up by, say, 10% in the next few years ours would be worth 165k instead of 150k, but what we are looking at would raise from 225k to 247k, which would definitely take it beyond what we can afford.

Sometimes my head spins with the figures and I tend to lose the plot slightly !

More help please!!