Nearly got a mortgage, overpayment advice please!

jjjenny

...by heckers, (said in a strong Yorkshire accent) there are just too many options! So.... if we split the cash three ways... do up the house with the money budgeted, save the rest for a rainy day/more lit up sexy drinks cabinets next to fire places, any loose change down the back of the sofa chuck at the mortgage...

*head spins*

Jenny

xxx

pinkteapot

It's not too confusing once you get going.

Our monthly budget is all done in Excel. Our joint net income minus mortgage and bills (anthing that comes out via standing order or direct debit) leaves our disposable income. We decided between us that we would save X of our disposable income and have Y to spend. At the start of the month, X goes into savings. At the end of the month, anything left over from Y that we haven't spent then gets put into savings as well.

When we first moved into the house, any money going into savings went into savings accounts. Now that we've built a comfortable pot back up (after spending the house deposit!), that money that is 'going into savings' just gets paid off the mortgage as an overpayment instead.

We've been taking a hiatus from any saving for the last 3 months and using the money to do up the house without dipping into savings. January onwards, we'll be saving again (overpaying the mortgage).

I'm such a geek about it. I have a graph that gets updated monthly. For each month there is a bar showing our savings balance. Above that is a line for the mortgage balance. It starts off with savings going up then, since we started overpaying, the mortgage balance line started coming down more steeply. Point is, you can see that in the long run they'll converge and at that point, we'll know that we could pay off the mortgage if we wanted to (by emptying our savings). It's a great motivator.

I also have the Excel sheet that I think you have too - the overpayment calculator. So far we have saved £7,500 in interest over the life of our mortgage with our overpayments. :money:

jjjenny

OMG OMG OMG, I'm sooo glad it's not just me that gets excited about all this kind of stuff! (I am the biggest geek in the world ever when it comes to spreadsheets and the idea of paying less interest tickles my toes!)

I likethe idea of the excess after savings/out goings going back into savings or that possibly being used to over pay the mortgage etc... I know you must think I'm being a bit daft, posting before I've even got a mortgage, but I think with a careful planning now I think we can nail this and save on some interest.

Jenny

xxx

JimmyTheWig

Sounds like you'll be just fine jjjenny.

Sepa74

Lol... boy do you have the bug!

I'm with the guys who have already posted... they've given good advice.

The only thing I would say is that your rate is a bit high, so once the house is liveable (please post a picture of the drinks cabinet, pretty please!) and you have an emergency fund built up, you should think seriously about paying off the mortgage as you may find it difficult to get a savings rate as high as your mortgage interest rate.