Should I pay off my mortgage? Discussion area

JonnySegway

Not sure if this has been covered but I am on a Barclays Variable Tracker - others may work the same. When you overpay that payment goes into a seperate pot and you will not see a reduction in your monthly payments - only a reduction in term, this benefit obviously only realised at the end of your term. So imagine you save equivalent of 2 years payments then your term is reduced by 2 years - not your monthly amount. However if you have a sizeable amount in this pot then you can request your mortgage to be re-capitalised (it has to be >3 times your monthly payment though) which then reduces your monthly payment. Bear in mind that until you request this, your 'pot' is just that, not earning interest. So use a savings account until you have >3 times your monthly payment at least.

Or you pay in >3 times your monthly payment in one and this recalculation is automatically triggered.

pjcox2005

Haven't read all comments but the article really should reference pension payments. Many have too little pension, so paying more into these with the tax saving, often employer matched contributions and the growth will be way more effective than overpaying a mortgage, even if that means you need to use part of that pension (25% tax free) to settle the outstanding mortgage on retirement.

There is an argument article gets too complex if start including pension, but the persons quote "So my ex-mortgage payment can now go towards a fantastic retirement pot." already goes there and they would have been better off having the overpayments make up the retirement pot, not wait until the mortgage has gone.

Finance_and_fings

Help! Should I overpay my mortgage?! The article didn't cover the possibility of your mortgage provider NOT easily reducing the term of overpayments. So I am wondering what to do with my mortgage renewing next week from 1.40% to 4.42% and being the position to make an overpayment of around £20-30k on the remaining £290k mortgage.

HSBC DO NOT apply any mortgage overpayments to the overall term e.g they will not reduce the term. it simply comes of the balance of the debt (monthly payment will remain the same). If I want to reduce the term you have to go through an entire new application process 4-6 weeks and currently I would not meet their criteria for the loan as my financial circumstances have changed having gone from PAYE to Limited Co. Director - however I can go through the application to see without it affecting my current mortgage. 

If I did make an 10% overpayment will it be worth while if the term is not reduce?! I am also in a position to make regular overpayments going forwards - again is this worth while if the term is not reduced but the debt is reduced. 

What different would it make overpaying in the next week before I am on a higher interest rate?! 

Any advice would be very much appreciated!