Small Overpayments - Impact?

Phelpsie001

Good morning (as I type this)

Just for a bit of background:
I am 22, bought a home for £144,000 in August 2009. My interest rate is approx 6.49% (ouch). My repayment each month is £761.72 until 2014 when my rate ends.I borrowed £130,330 and as of May 2011 I owe approximately £122,000.

I overpaid £4,000 in 2010 and have just started to over pay in 2011!! Just paid back £37.03 or approx 0.03% of my original debt!!

My capital repayment is only £86 a month atm, but my 2011 aim is to break the £120,000 mark by December with overpayments and my capital repayments!!

I'd love to hear from people who make small O/P's ... how much per month/year? Does it make a difference??

I'd love to be mortgage free in 15 years ... I am now commited to this goal!!!

SAMMYE_2

Its the pennies which make up the pounds....

I look back to when I was younger I always told myself it wasnt worth me saving anything until I got older and earnt more as the savings I would make would dwarf any tiny amount I managed to scrape together as a younger poorer me. What I failed to understand was that saving and overpaying is a journey and every little overpayment gives you more money which enables you to overpay more and more and it escalates and you then find more ways to save and overpay.

The journey of a thousand miles starts with just a single step.

So yes overpay as much as you can happily afford to as the seed will one day bear fruit.

andy.m_2

The short of it is that any overpayment no matter how small is a good thing.
There are a number of online and excell spreadsheets that will show you the benefits in real terms.

In my case, the overpayment saves 4.99% whereas my savings pay 3%

no brainer

CathT

I only make fairly small OP's too, target this year is £3k but I just remember someone commenting once that once the money is overpaid you never have to pay interest on it again.

What are the penalties like on your fixed rate? There is a good tool on here to see if it worth coming out of the fix.

Phelpsie001

The fee for buying myself out ofmy current term is approximately £5,500 and so would dwarf any savings I'd make on another deal =(

I am trying to build a £5k rainy day fund and then just overpay small amounts? My old theory was to build up big money (£5k+) and then pay that off. However as my interest is calculated daily, this would be the wrong way to do it!!

dimbo61

You are saving 6.49% tax free with each overpayment so thats better than you would get from any savings account!
You have already built up 6 months of overpayments so if you really needed a " mortgage holiday" you could have one which is something to bear in mind.
By overpaying you will be saving £2 for every £1 you overpay now with that sort of interest rate and 25+ term.
Keep up the good work