HSBC SVR - Overpay/borrowback or rainyday fund

Cazzr

We are on a HSBC SVR (currently 3.89%) mortgage and are very almost debt free and intend to overpay the mortgage next.

I gather setting aside some 'rainy day money' is sensible but gather if our mortgage is flexible (in that we could get back some overpaid money if need be) we could just throw money at the mortgage rather than build up a rainy day fund first.

So, my question. Does anyone know if a HSBC SVR mortgage allows you to do this?
I can't find out from the website and plan to ask HSBC through a message in internet banking but thought I'd ask here too, seeing as you lot are experienced MFW's.

thanks in advance.

Cazzr

Also, another question pops into my head. We have all sorts of redundancy/sickness/life insurance. Do we really need a rainy day fund of 3 months still?

getmore4less

THe problem with the flexable mortgage is if you have to ask for the money, the reason you might need it could be one where they refuse to let you have it.

Emergency funds in ready(ish) cash enough to cover 1 or 2 unexpected expences.

Then decide how much the disaster fund needs to be for loss of income
I recommend minimum 6 months expenses.

Cazzr

Getmore4less: so by expenses, do you mean mortgage replayments etc too? As surely thats what I've been paying the insurance for? It'll take us more than 6 months to save 6 months worth of outgoings...

getmore4less

If you think you have all angles for loss of income covered then you can consider a smaller pot but you still need one.

What happens if they take a month or to to pay out.

What hapens if something happens that there is no cover for.

The angle alot of people forget critical illness of the lower/none earner meaning the higher earner has to give up work.

Cazzr

I get what you are saying and I hadn't thought about how long the borrowback would take or indeed if they refused it so certainly think a smaller pot is in order. As for illness, I get 12 months sick pay, other half i think 3-6 months, but the insurance cover is not critical illness but income replacement cover incase we cannot work due to illness.
I can't recall the finer details but we got it out at the time because we were paying down debt as fast as poss and didn't have a rainy day fund and wanted cover.
I guess it's possible they could refuse payout but if we were ill, we'd not overpay till we were fully fit again and would have about 3-12 month warning of this surely... EDITTED TO ADD: Before pay drops I mean, not warning of illness....

Hmm, lots to think about I spose, I guess I'm a bit overeager to pay down the mortgage, especially when saver rates are so low.
Maybe we'll put a couple of months overpayment in a saving account (approx 400 a month) first then split the amount between saving and overpayment.

Feels wierd to be in the position with no debt apart from mortgage (for the first time ever, as been in debt since I started uni) to think about. I wonder how we coped with unexpected expenses before?! Oh I do know, credit card and overdraft..

getmore4less

As for illness, I get 12 months sick pay, other half i think 3-6 months, but the insurance cover is not critical illness but income replacement cover incase we cannot work due to illness.

Does this cover you not being able to work because the OH is ill?

What level is the income cover and how long does it last.
It needs to be at least covering current expeces if not you need to have topup funds.

a save and overpay works just takes longer to get to the point of being able to self insure.

Cazzr

Looks like I am going to have to take a look at all the policy details for the insurances (took them out 2.5 years ago through a broker) but I think I get the point, think we need to build up the buffer before overpaying.

Out of interest, does anyone else have these insurances and therefore do you alter your rainyday money at all? Starting to look at finances in a whole new way. Before was counting down the debt, now it's a case of looking forwards and building a buffer.. I'm thinking post office cash isa....

Jonbvn

OP,

We have a tracker mortgage with HSBC. We cannot borrow pack any money once paid off. Check your T&C's on this issue.

Cazzr

Jonbvn, thanks for your reply. I have messaged HSBC in internet banking (we have our joint current account there too) so hope to find out soon, will dig out the paperwork tonight but suspect we are in the same boat. Especially with us being on the SVR...

Think we are going to set up an isa and throw the money there to start with and then start overpaying when we have our rainy day fund.

dimbo61

I have an offset mortgage so can have a "mortgage holiday" with the overpayments if we need to but building up an emergency fund of 3/6/9 months of income ( depending on job situation!!!)
Is always a good idea
Say the car engine blows up and a recon unit is £1000+ have you got that spare or does it go on the credit card at 17/19% same with the central heating or many others expensive events.
Now if you have £6/7000 sat in the bank and the car is written off in a bump then you have the money once the insurance company pays out to get a good second hand car without expensive finance.
This would not be covered by insurance