Advice Please! Newbie!

dorme

Hi all! :wave:

Just after a bit of advice really! ill be as basic as i can!

i am just about to pay off my loan with savings (£11,000) at the end of this month, got these savings through hard graft at work, gaining a promotion etc. my monthly loan payments are £279.

my mortgage is 126,000 with NR-we are stuck on SVR at the moment and in a little negative equity in a 1 bed flat (berkshire) and want to get out.

so, do i, with my £279 saved from my loan, overpay my mortgage for a year to try and get rid of some of that 126k, or just put it in savings and pay a lump off?
(the reason i say a year is because the bank rate will prob be alot higher by the end of the yearand ill need that 279 for that!)

will i actually reduce the capital by much?

many thanks!

Senior_Paper_Monitor

You are probably paying 4.79% on current mortgage - you will not be able to get anything approaching that tax free on savings.

No brainer - start overpaying it off the mortgage - will be getting you about £3,500 equity per annum in the first year.

dorme

Senior_Paper_Monitor wrote: »

You are probably paying 4.79% on current mortgage - you will not be able to get anything approaching that tax free on savings.

No brainer - start overpaying it off the mortgage - will be getting you about £3,500 equity per annum in the first year.

brilliant, i take it the money i pay off the mortgage will automatically repay the capital on its own? northern rock allow overpayments up to 500 and borrow back facility also?

beecher2

Try to overpay by more than the £279 if at all possible. If you want to move you'll need to build up enough equity to have a 10% deposit in the new place.

Thrugelmir

dorme wrote: »

brilliant, i take it the money i pay off the mortgage will automatically repay the capital on its own?

Is your current mortgage interest only or repayment? That'll make a difference as to how quickly inroads are made into the capital balance owed.

Every month the additional £279 paid will reduce your monthly interest charge by around £1.12p. Doesn't sound much but over time the effect of saving on compounding interest will mount.

If you are serious about moving house then review your budget and see where else money can be saved and used to repay the debt.

romylou_2

I agree to op on your mortgage if you are in the position to be able to do it. Im also with NR on their SVR (which is pretty good at the moment) and am paying only £100 per month op. I have about £102,000 but I need to clear my debts first. Senior Paper monitor is right, you do not get 4.79% on your savings, so go for it.

Good Luck x

dorme

Thrugelmir wrote: »

Is your current mortgage interest only or repayment? That'll make a difference as to how quickly inroads are made into the capital balance owed.

Every month the additional £279 paid will reduce your monthly interest charge by around £1.12p. Doesn't sound much but over time the effect of saving on compounding interest will mount.

If you are serious about moving house then review your budget and see where else money can be saved and used to repay the debt.

its repayment mortgage? ok, but it actually reduces the balance of the mortgage by the amount i have overpaid yes? (ie, i pay 10k over a year, my mortgage outstanding balance is 10k less?)

Thrugelmir

dorme wrote: »

its repayment mortgage? ok, but it actually reduces the balance of the mortgage by the amount i have overpaid yes? (ie, i pay 10k over a year, my mortgage outstanding balance is 10k less?)

In answer to your question, yes it will.

The lower you reduce your mortgage balance. The less future interest rate rises will impact you.