Is it really worth it...?

rich744

Annual statement came through today. On it, there is a new section - 'Overpayment Reserve'

After reading and a quick call, turns out that all the overpayments I make (currently 2750) go into the 'Overpayment Reserve'. This amount can then be given back to me if I wish, or be used to reduce my monthly repayments for a given time.

So pleased that there is this extra flexibility with my mortgage. This allows me to pay more off knowing that if I need it I can get it back, or use it to reduce payments!!

pawlala

rich744 wrote: »

If Bank rate were to climb by even 3% this would cause mass defaults on mortgage payments. Huge numbers of people are teetering on the edge of the debt abyss....

A very important point you made right there, we could see another spate of repossessions over the next 36 months.

drewwa

Also worth considering with the 'overpay' or 'save' dilemma is that whilst saving may be more effective at the moment, in order to achieve the necessary savings rate you may have to lock your money away for a period of time.

If the situation changes, and I think it's volatile enough to factor in a degree of risk, the effectiveness of the saving route may alter quickly.

Obviously you can then transfer the savings to the mortgage, but you could forfeit interest as a result if you need to do it quickly.

The less effective financial route (right now) of simply hitting the mortgage may appeal to those with lower risk tolerance.

Cheers,

Drew.

denmjd

dimbo61 wrote: »

In 1991 the bank of england base rate was 15%!!!! so thinking that rates will stay low for the next 20 years is a bit of a gamble.
Now building up savings in cash ISA,s paying more than your mortgage rate and overpaying to clear the mortgage asap is not such a gamble.

I have to agree it is an ideal opportunity to overpay it if you can, I had a mortgage through the very high interest rate times in the late 70's it over doubled for us as first time buyers from 7% -16% nightmare!! :eek:(thanks to Maggie) we sold everything to keep going, car went first followed by most of the furniture, (I wish we had had this forum then, but luckily my parents & granparents were thrifty so they taught me a few tips:T) so many of our friends lost their houses at the time, so as you can see it is a reoccuring thing...

Good Luck with paying it off, I know it seems hard but it's worth it in the end I think..
:beer: Hope this helps you

Spiggle

For what it's worth, imho I think you should hold on to your savings but throw everything you can at the mortgage on a monthly basis. And I say this from the standpoint of someone who is paying only 0.69% on one and 1.49% on the other mortgage with no OP restrictions either!

This is because I know that if me and my OH built up huge savings we would not be able to resist using it for somethnig else 'essential'. Wouldn't matter what we called it - 'Only for Mortgage Savings' etc. So that's the personal side. The other reason is that we too suffered from the interest hikes of the mid to late 80s where we went from a mortgage rate of around 9% up to around 18% in the space of around 18 months! So I want to get rid of as much of the mortgage as possible to at least have some cushion. The other benefit of course is that by overpaying now we're much more used to a higher amount going out of our account every month so when rates do rise it won't be quite such a shock to the finances.

But do keep some savings and if possible top your cash ISA up to the max before the new tax year begins in April. It would be a shame to lose the tax wrapper benefits.

Hope my rambling was of some small use!
Spigs

abouttimetoo

rich744 wrote: »

Annual statement came through today. On it, there is a new section - 'Overpayment Reserve'

After reading and a quick call, turns out that all the overpayments I make (currently 2750) go into the 'Overpayment Reserve'. This amount can then be given back to me if I wish, or be used to reduce my monthly repayments for a given time.

So pleased that there is this extra flexibility with my mortgage. This allows me to pay more off knowing that if I need it I can get it back, or use it to reduce payments!!

That's good news Rich744, as you say it gives you a bit more flexibility. My own T&C's are that I can't have all my OP's back but on the other hand I'm allowed to stop paying them completely until all the OP's i've made are used up (if you see what I mean)

Can I just check one things though, is the money in your OP reserve definately being used to reduce the balance in some way? I'm just a bit concerned as some people have found that their OP's have just been placed in a separate account building up and have not been used to reduce (or offset) the mortgage balance at all.

Well done on your progress so far