Are we in a small minority?

pawlala

OVERPAYING your !mortgage while interest rates are low could leave you £42,000 better off over 25 years.

Research from First Direct shows a typical homeowner, with a £100,000 loan, who pays an extra £300 each month over the 25-year term would save themselves a hefty £41,665. And they would pay off the debt 12 years early.

Whereas a borrower paying the minimum repayments and saving £300 in a separate savings account would actually end up £42,909 worse off. Overpay by £200 a month and you could shave nine years and six months off your mortgage and be £33,000 better off.

Richard Tolchard from First Direct says: “Our analysis shows borrowers are often better off paying down their debt ahead of saving as historically the average rate of interest paid on a mortgage has been consistently higher than the average amount earned by saving.”

With pathetic rates on saving, this is one way to make your cash work for you. But make sure you have an emergency fund set aside.

Read more: http://www.mirror.co.uk/advice/money/2011/11/26/overpaying-your-mortgage-could-leave-you-42-000-better-off-115875-23588634/#ixzz1fBllTDEJ

pawlala

Consumers choose savings accounts before mortgage payments

Twice as many people choose to put money into a savings account rather than overpay on their mortgage, new research has shown.

This is despite evidence which suggests that overpaying on a mortgage can in some cases bring better long-term rewards than paying into a savings account. The survey of over 1,000 mortgage-holders by First Direct, an online bank, found that 42 per cent regularly pay into a savings account, whilst only 21 per cent regularly make an overpayment on their mortgage.

The bank suggests that one reason for this could be that many mortgage holders are not aware of the current status of their loan. Just under a third don’t know what the interest rate is, whilst 43 per cent don’t know what the total cost of their mortgage including interest is. A quarter don’t even know whether they could make an overpayment if they wanted to.

Richard Tolchard, Senior Mortgage Manager at First Direct, commented, "People continue to try to put some money to one side and mortgage-holders are no different in also wanting to pay down their loan.”

He added, “However, as this study shows, more often than not they choose to feed extra money into a savings account. This is where an offset mortgage can offer the best of both worlds, acting as a savings account and a way to reduce their net borrowing, as the customer keeps the flexibility to access their savings if they need them."

Read more: http://www.qck.com/consumers-choose-savings-accounts-before-mortgage-payments-181213.html

pawlala

Have Tesco mortgages got a bit tastier?

Tesco Bank's move into the mortgage market was long awaited, but its launch in August was something of a damp squib.

To be fair, expectations were extremely high of the new lender, possibly too high. Many wondered if it would take the supermarket's stack 'em high, sell 'em cheap approach to the mortgage market - giving the major lenders something to worry about.

In fact, the lender launched products that were decidedly average – a range of decent enough deals with decent enough rates, but no best buys and a loyalty scheme that offered borrowers a pretty measly number of Tesco Clubcard points for every pound they repaid on their homeloan.

Still, the positives were - and still are - that Tesco's launch range is simple and straightforward and has good flexible features, like the ability to overpay up to 20% of the mortgage each year – twice that allowed by most lenders.

Read more: http://money.aol.co.uk/2012/09/13/have-tesco-mortgages-got-a-bit-tastier/

Beckyy

It's easy to just let the DD come out each month and not have to worry about making a conscious effort to pay any extra because you don't have to. It wasn't until I worked out how much time and money we could save my OPing that I realised how worthwhile it is. Thank goodness for that!

pawlala

Should I overpay my mortgage or save in an Isa?

Q. Would it be better to invest £5,000 in a cash Isa paying 3.3%, or pay off £5,000 of my £185,000 mortgage which has a fixed rate of 2.99% for one more year? GC

A. It depends on what sort of mortgage you've got. If you have an interest-only deal, paying off £5,000 would save you £144 in interest over a year, which is less than the interest of £165 you would earn if you put £5,000 into your cash Isa.

However, if you have a repayment mortgage, paying off £5,000 would mean your monthly mortgage repayment would go down from £877 to £853 (assuming a 25-year term). So over a year you would save £288, which makes paying £5,000 off a repayment mortgage a better deal than investing in an Isa.

From: http://www.guardian.co.uk/money/2012/oct/10/overpay-mortgage-or-save-isa?newsfeed=true

Lois_E

But if you put the money in an ISA, then that amount is tax-free as long as you leave it in there. If you pay the money off the mortgage, this year's ISA allowance goes to waste.

So there's no one right answer. It depends how long you're going to have the mortgage, how long you would be able to leave the money in the ISA, and probably other considerations too.

Me99_2

I don't know anyone who makes overpayments - even those who could afford it.

I'm of the generation who bought in the late 80's/early 90s when interest rates were much higher. Until monthly payments started to drop it wasn't possible to make an obviously significant difference. (It all felt like Monopoly money anyway and savings rates were much better then too!) Didn't have the mortgage calculators that are around now either and there was a limit to what could be overpaid. All in all there didn't seem to be much point in the early years.

When monthly payments and interest rates did begin to drop I'm so glad I took the advice to not allow myself to get used to the extra money in my pocket ...:money: (The whole endowment shortfall thing helped focus the mind too..:eek:)

None of my friends in a similar postition appear to have made adjustments. Neither have those with straight forward repayment mortgages. Instead they enjoyed the bigger houses, foreign holidays, cars etc. Now they're worrying about the cost of living increases.
I'm MF (as of 2 days ago:j) and not at all sorry! Time now to focus on doing some of the things I've done without as well as some 'retirement planning'.

As for the youngsters who have naively taken on big mortgage during the last few years and are already struggling with payments, I do feel for them... I just hope they find a site like this before it's too late.:(

newgirly

Congratulations me99 on clearing your mortgage!

I think that people's expectations are very high when it comes to their homes and not enough thought goes into quality of life versus expensive house. A lot of people just want to get as high "up the ladder" as possible, a few years ago we were offered a mortgage of £240k on a new build which luckily for us fell through, this year we struggled to change providers on a mortagage of £148k whilst on a higher wage than previously.

I've never come across anyone else who op's their mortgage in real life and whenever I have mentioned it, its seen as pointless as your lifestyle has to suffer in the meantime.

Sepa74

Except that if you re-prioritise on quality of life instead of worrying about signalling your status, the odds are that you will find your standard of living actually goes up and your stress levels go down!

edinburgher

Except that if you re-prioritise on quality of life instead of worrying about signalling your status, the odds are that you will find your standard of living actually goes up and your stress levels go down!

It can be hard deviating from the norm, regardless of how idiotic the norm seems! Work colleagues looked at me like I was a three headed alien when I said that I wasn't spending a fortune to dress up and go out clubbing for Halloween.

The reasoning that I'm a grown up and that Halloween is a Hallmark holiday didn't seem to wash with them :rotfl:

Stuff it, I can buy all the costumes I like when our mortgage is gone!