To Overpay Or Not To Overpay??

Miss_Penny_Pincher_2

KMy regular savings interest pay more interest at 10% = 8% after tax!

johnofhertford

kenshaz wrote:

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

I think there is still a lot to be said for most people building up some savings before making overpayments on a mortgage, because it reduces the risk that you will need to borrow at a later date, e.g. if you need a new boiler or decide you'd like a holiday etc. Don't forget your pension saving either.

nellis10

johnofhertford wrote:

I think there is still a lot to be said for most people building up some savings before making overpayments on a mortgage, because it reduces the risk that you will need to borrow at a later date, e.g. if you need a new boiler or decide you'd like a holiday etc. Don't forget your pension saving either.

I'm budgeting to save £100 in an ISa from Jan 07 and £100 for hols etc too. So I've estimated I have about £50-100/month left for overpayments. Is it better to pay off capital or term...I think this is my biggest Question...and sorry to OP for hijacking!

We have an appointment with the Mortgage Adviser at the Nationwide at the end of September to decide what the best bet is for maiximising our mortgage to pay the least amount of interest.

comping_cat

Im lucky with my mortgage, i can make unlimited overpayments which will reduce my mortgage term, but if i ever need some cash in a hurry, i can withdraw any of the overpayments ive made, so rather than stick it in a savings account, im going for reducing the mortgage, knowing that if i did need the money quickly, i can have it!!!! Its with the Northern Rock, 5 year fixed rate of 4.99%. (4 years of fixed rate left!!!)

Joe_Bloggs

@nellis10
You can pay any amount of the Nationwide mortgage at any time. Just keep the total overpayment below £500 in a month. What you can do is defer making an overpayment until you are pretty sure that you do not need the money where it is. I keep my money in an esaver @4.8% gross until seconds before I transfer it to the Flexaccount and then seconds later, transfer it to the mortgage. You can view and make payments to your mortgage online.

It is a pity that Nationwide's ISAs are poor value and they don't have a regular saver to tempt anyone. I think they are gaining 2500 new customers a day as things stand.
J_B.

Thefunkygibbons

start with the £50 and over time, see what you can do to increase it

nellis10

Thefunkygibbons wrote:

start with the £50 and over time, see what you can do to increase it

But should it be taken off term or capital? That's what I don't understand...:o

Joe_Bloggs

Overpayments can be treated in two main ways. The thing they should always do is reduce the capital. The lender now has a choice to do nothing or reduce the monthly payment so that the term remains the same. If they do nothing you will actually pay off the mortgage quicker because you have reduced the capital owed and maintained the same amount of monthly payments.

J_B.

nellis10

Joe_Bloggs wrote:

Overpayments can be treated in two main ways. The thing they should always do is reduce the capital. The lender now has a choice to do nothing or reduce the monthly payment so that the term remains the same. If they do nothing you will actually pay off the mortgage quicker because you have reduced the capital owed and maintained the same amount of monthly payments.

J_B.

Thanks!

Would that be the cheaper way...ie in terms of the amount of interest overall paid?

Joe_Bloggs

The cheapest way is to allow overpayments to shorten the term. You have to instruct Nationwide to do nothing, as I mentioned before, there is a choice. I managed to do this over the telephone.
J_B.