is it worth it?

thelizzyfiles

hi folks, first post after looking for ages
little background, single woman,great job (not great wages tho) brought little flat down south on 100% mortgage and 4x's wage 10yrs ago and sold five yrs later for double :j
moved up north (still with job) and got a lovely little 2 bed house with lovely garden

really really want to start overpayments on mortgage, but because i got a new car (payments still till sept 2012) i dont really have much chance to save much. Anyway done really well on cutting back ie sky gone,changed gas and elec,even got birthday prezzies and saved thanks to lloydspharmacy buy one get two free :T
what i really would like some help with is that do i start with a small overpayment monthly? got £25 spare (thanks to cutting sky back) as £25 isn't going to do much as savings. Mom say's save , i say as it wouldn't be missed start on mortgage. Got some savings (only 1k) what would you lovely folks do?

Sepa74

Well done on cutting back your spending!

With regards to your question, I would say you should build up your savings to 3 - 6 months worth of outgoings.

Where you put your savings depends on whether or not you can get back your overpayments easily. If you can't, then put the savings in the highest interest paying ISA account you can find (ISAs are tax free, so you don't have to worry about paying tax on the interest you earn.

If you can, then whether you put it in your mortgage or a savings account depends on the relative savings rates - if your mortgage interest rate is lower than the interest on an ISA, put it on your mortgage, knowing you can get it back easily in an emergency.

I hope that helps

thelizzyfiles

thanks sepa74

silly really when i know in my head to save up first it's just been a real boost to read about others getting their mortgage down, i've done well so far with getting my credit cards down ( went up to 3k) in the last yr and now only on less than 1k, both cards on 0% with £25 dd and overpayments wen i can each month hence no savings going in.
saved over £200 so far this yr with cutting out sky and getting loads of stuff for birthday and xmas prezzies this yr in the sales and told family cutting down (job may change next yr) so need to pay off as much as poss as will still have the car to pay for, can still make all the payments but will be cut back to the bare min so next yr will be even tighter till the car paid off

adwat

Making overpayments is definitely worth it. Looking back at the interest per month on my mortgage it's now just under £100 per month and when I first started making overpayments it was £700 per month. Every little helps as the advert says and £25 per month now might not sound a lot but over time it adds up.

BFM

if the apr interest rates on your credit card or car loan is higher than your mortgage then overpaying/clearing them first if possible probably more preferable (once you have your emergency fund in place)

ViolaLass

Sepa74 wrote: »

If you can, then whether you put it in your mortgage or a savings account depends on the relative savings rates - if your mortgage interest rate is lower than the interest on an ISA, put it on your mortgage, knowing you can get it back easily in an emergency.

I think you meant to type this the other way round - the money should go wherever the interest rate is highest (subject to considering whether you could/would need to access it in an emergency).

thelizzyfiles

thanks to everyone for their posts
lots to think about for the future, once i've paid off the cards i can start saving again, luckly the car is on 0% and cards both finish 0% soon. working in a town with the bank where my mortgage is tomorrow so will pop in and get the low down for the future
best of luck to all and lots of money saving :beer:

Jesthar

When you talk to your bank, check if you can 'borrow back' your overpayments in the future if the need arises. I can, so most of my spare cash goes to overpay my mortgage, as I know I can get it back if I absolutely have to - I treat it like an emergency savings pot which has the added advatage of paying off my mortgage a heck of a lot quicker

~Jes

thelizzyfiles

OMG that was easy :j went to the bank today Santander but mortgage is with Alliance Leicester so they let me use their phone to ask my question's about overpayments, I can pay upto £499 a month with no charge and just have to ask and i can change my DD anytime i want
Thought oh what the heck got them to up my DD by £25 a month starting this month, as soon as the cards are paid off (which wouldn't be long now) i can start saving and up my DD again. Know it's only a small amount but it's a start and the only way is up

:j:j