Can Someone Answer My Question

tesuhoha

We are finally in a position to make overpayments of £500 to our mortgage but am wondering if I make a payment today 29th January when will I be able to make the next overpayment. Is there a cut-off at the end of the month or does it just run monthly. I'm a bit worried because next month is February, a short month and I don't want to incur any redemption fees.

Also I am being made redundant in three months and want to use the redundancy and my pension lump sum to pay off the mortgage. However I am not sure whether to make overpayments for two years or just to pay it all off with savings.

At present we are on a tracker with an interest rate of 0.84%. We owe £37,000 and have 3 years 10 months left paying the normal payments. However, we have two accounts - one account is the mortgage, the other a further advance so we could make overpayments of £1,000.

I am unsure of what would save us the most money as we paid over £300 interest this year but our mortgage statement says we would pay £1,000 approximately if we repaid in full. However, as the payments go down the interest will be less but the interest rate may go up so I am at a loss as to what to do for the best.

I went on the mortgage calculator and at the present rate with those overpayments it would cost us £37,239 but I would love to be rid of the mortgage and it would be so tempting to pay it off.

What do you think?

LilacPixie

well you don't say who your lender is... some werk per calender month 1-28/29/30/31 and some based on your mortgage 'date' IE the day in the month your mortgage actually started. Is the further advance account at same rate??

I also have no idea what your tax status is but could you get a better rate of return with a cash ISA or regular saver account?

tesuhoha

Lender is Nationwide. The interest on the new balance is taken into account immediately.

tesuhoha

I am thinking of putting the lump sum into instant access savings and then paying the mortgage off with £1,000 pm overpayments. Will take about a year and a half I think.

stedwell

I am with the Nationwide and I have to make my £500 payments after my monthly mortgage payment has gone in. I normally watch online and then pay the next day. Hope this helps.:)

tesuhoha

Thanks. That does help.

Joe_Bloggs

@tesuhoha
I can not comment on your possible individual treatment of your overpayments. In the past the penalties were proportional to the term of the 'discount years' left. Ultimately there was zero penalty once you were on the now BMR (Basic Mortgaged Rate, for pre-existing customers only).

At present they are just as inflexible as the rest. So whatever you have got written down is what you will get.

I do not see the benefit of risking an overpayment charge of a few percent, or more, if delaying a few days could eliminate the risk.

I suspect what the OP, tesuhoha, needs is a way to handle finances in the event of a redundancy situation.

There are benefits and taxation issues involved that I can not comprehend though they may well affect me.
J_B.
This could happening to me or YOU !

dimbo61

I have deleted my reply reading your profile ( school cleark) so guess you are a lady!
You dont give your age or how long before you get a state pension ( If you get one!!!)
What you do say is that you are losing your job and getting a pension ( from your employer?)
Will you be able to claim benefits or does your OH work and your household income is too much?
You dont give the mortgage interest rate but if it was me I would drip feed the 2X £500 a month off the mortgage balance while trying to get the best rate for my savings in cash ISA,s , Regular savers and instant access accounts ( lloydstsb vantage account)
Good Luck

tesuhoha

I am almost 61 and am fortunate enough to be getting the state pension as I have always worked. I would still choose to work if I could. This is not what I had planned or what I would have chosen but I have to make the best of it. I will also get a small pension from work and a lump sum. My husband is a self employed plumber the same age as me and we want to secure the house as we are not getting any younger. I might do what you advise and gradually drip feed the payments unless the interest rate shoots up.

DVardysShadow

If your mortgage rate is 0.84%, put the money into a savings account which pays more.

jamesd

tesuhoha wrote: »

we are on a tracker with an interest rate of 0.84%. We owe £37,000 and have 3 years 10 months left paying the normal payments.

You'd save most money by not overpaying and instead putting your money into a savings account or some investment. It's currently easy to get interest rates that after tax are higher than 0.84%.

At the moment you can get about 3% from an instant access account. That's £1,100 a year on £37,000 saved. Mortgage interest on £37,000 at 0.845 would be less than £311 a year. That's £789 a year better off from not paying off the mortgage, ignoring tax. If you pay basic rate tax it's £569 a year better off after tax from saving instead of clearing the mortgage.

That's a big cushion if rates go up enough to make savings a bad idea.