To Overpay Or Not To Overpay??

louisjones30

My husband and I have been working really hard to pay off a credit card that was seemingly endless but we have finally done it. Hooray!! :T Now that we have no debts, apart from the obvious dastardly mortgage, we were wondering whether we should put money away in a high interest savings account or if we should overpay our mortgage each month.

As newcomers to this site, we would be interested to receive your comments please. Also, our mortgage is up for renewal at the beginning of next year. Currently ours stands at £77,000 so if anyone knows of any fantastic deals, we would be very grateful to hear. Also of good savings accounts too but we would need to get access to the money (in emergencies only of course!).

Many thanks.

nellis10

Hi!

We are in a similar situation.

We are debt free and have a mortgage of £102000 over 13yrs. I'm trying to find out if it is better to overpay £50/month (just to start with!!) and reduce the term or the capital. Appraently (and we are with the nationwide) they say that if we use the overpayments to reduce the term when we come for renewal it will increase the amount of interst we pay as it will be over a shorter period, whereas if we take it off the capital we reduce the interest we pay over the same period of time. Now I don't know what to do, whether to just keep it off the capital and then if we save up lump sums we can pay off more to finally clear the balance early.

So if it's not hijacking your thread I'd be interested in the best policy too!

Welshlassie

Well done on clearing your CC debts. :T

Check out Martins remortgage guide for advice on that also his best buys for mortgages to help decide on the best deal for you in January.

With regard to overpaying, if you can get a savings account that has a better rate than your mortgage then your money is better in there (lumping off the mortgage once a year) than in your mortgage (have a look at the A&L 12% regular savings account, you will need to open a current account as well though), if you have a high interest rate on your mortgage and you can't get a svaings account which betters it then it is better coming off your mortgage.

HTH

nellis10

Our rate is 5.02% with Nationwide and the savings is 4.75% with ING...I guess I should look at the A&L as we have a current account with them too.

Llyllyll

I posted a similar question the other day here. There's a link in there for an Amortization Schedule Calculator that will give you a rough idea how your mortgage will reduce when you make overpayments.

Hope this helps.

humfer

Congratulations on paying of your credit cards. Would always suggest paying off extra on your mortgage where possible because the savings in both interest and timescale are often massive. However if you have just come out of debt, I would suggest you get a little stockpile to keep you safe come a rainy day just incase first

humfer

humfer wrote:

Congratulations on paying of your credit cards. Would always suggest paying off extra on your mortgage where possible because the savings in both interest and timescale are often massive. However if you have just come out of debt, I would suggest you get a little stockpile to keep you safe come a rainy day just incase first

Here's an excellent site where you can play with all sorts of scenarios to see what sort of saving you can get with overpaying on your mortgage

http://www.loanbright.com/edirectlending/calc_amortization.html

bootman

I too am with the Nationwide. Started 3 years ago with £128k mortgage. Have overpaid the maximum of £500 overpay every month bar the first 2. Took out over 20 years.

Today it stands at £98k and the term has gone down to 13 years 4 months:j

My fixed rate expires next month. It was 4.09% so I am in for a rise.:rolleyes:

I plan to chuck virtually all my savings at it as soon as the fixed rate expires then put it on an new fixed rate. I am sure I can clear it in 5 years hopefully!

Overpay and reduce the term, never reduce the monthly payment.

humfer

bootman wrote:

I too am with the Nationwide. Started 3 years ago with £128k mortgage. Have overpaid the maximum of £500 overpay every month bar the first 2. Took out over 20 years.

Today it stands at £98k and the term has gone down to 13 years 4 months:j

My fixed rate expires next month. It was 4.09% so I am in for a rise.:rolleyes:

I plan to chuck virtually all my savings at it as soon as the fixed rate expires then put it on an new fixed rate. I am sure I can clear it in 5 years hopefully!

Overpay and reduce the term, never reduce the monthly payment.

Thats quite some saving - it really is quite astonishing seeing the amount you can save say by just overpaying £50 or £100. Only been overpaying for just under a year so far but already seeing big benefits

UK007BullDog

I am also with Nationwide and have been overpaying for the last 2 years £80 per month. Once we have paid off the Credit cards we will increase it as far as we can afford it. Once my kids are out of College and University we will do the max payment of £500 and then stick the rest in Isa's to get rid of the mortgage as quickly as we can each time we remortgage. Currently we are half way through a 5 year fixed. Next time we might only fix for 2 or 3 years to be able to chuck the Isa's at the remortgage. Depending how it goes we could be mortgage free in the next 10 to 8 years.

kenshaz

over-pay every time you will never get an interest rate to match your mortgage payments and your savings interest is taxed
:cool: