Overpaying on mortgage

hulahoop09

Hiya

I have read a few posts where people overpay on their mortgage. Do most people do this? We havent been able to do this (have had mortgage for just over 4 years) due to budget, maternity etc and may not be able to for a little while yet (and may only be a bit when we do as we dont earn huge amounts and want to be able to go on holidays and provide for our little girl and extend our family etc. Lol. We have had years of being on tight budget and would like a little to enjoy ourselves. Lol. If we just pay what we are meant to til it ends it would be cleared by the time I am 50 (I am 29 now). Apart from mortgage being cleared sooner what other benefits does it have if people can pay more and what extra a month would you need to pay for it to effectively benefit you?

We had fixed mortgage from 2008 for 5 years with halifax 5.79% which will drop to svr after the 5 years.

Thanks!

reehsetin

only just started repaying and definitely will do more, immediately my monthly repayments went down by £100 because we paid in a lump sum

Take a look at this to see what the effects are for you http://mortgages.firstdirect.com/mortgage-overpayments-calculator?WT.ac=MRP1384

hulahoop09

Thanks! Thats fab. It is something I would love to do in the future. Circumstances at the moment dont allow it. We likely will have to stay in the house we are in as it is worth about 18k less than we paid and they are not even selling at that much less!! Lol. Would love an extension as is only a 2 bed (we would like 1 more child - have 1 at the mo) starter home with economy 7 and no gas supply to the property so all these things are gonna cost a fortune!

Anyway thanks again for that link!!

Yorkie1

It is usually recommended that you have 3-6 months' salary / expenses set aside for a rainy day before you start making other savings plans.

Once deciding whether to overpay, the general rule of thumb is that if you can get a savings rate higher than the mortgage rate, then save. If the mortgage rate is higher, then pay that off.

But don't forget about pension provision etc too.

If you ever want to sell up, you'll need to clear the negative equity as well as have a deposit for the new place, so that's something to bear in mind too.

AFK_Matrix

Yeah I am saving up so that I have a good rainy day fund then I am going to save up for 5 years as that's when my fixed rate ends. Then when I go to remortgage i can put the savings down as a bigger deposit.

hulahoop09

Yorkie1 wrote: »

It is usually recommended that you have 3-6 months' salary / expenses set aside for a rainy day before you start making other savings plans.

Once deciding whether to overpay, the general rule of thumb is that if you can get a savings rate higher than the mortgage rate, then save. If the mortgage rate is higher, then pay that off.

But don't forget about pension provision etc too.

If you ever want to sell up, you'll need to clear the negative equity as well as have a deposit for the new place, so that's something to bear in mind too.

Gosh that would take us a while to save a 3-6 months worth of salary!! Lol.

We dont have a pension as havent had money to put into one at the moment and I havent been in a stable job. I turn 30 next year so could do with thinking about it but have heard horror stories about people losing pretty much all of what they put in etc. I also plan on going into a career by the age of 35 so wont be in this job forever so just not sure what to do!!

I dont get how equity works etc!! Lol. I know our property was valued at 110k we took out a mortgage for approx 80k (30k deposit - hubby already had in the property) and now properties near us arent really selling for 95k. We would be unlikely to sell and just make do with what we have.

GSXRCarlos

If you have a bit of emergency money in the bank, then in short try and overpay your mortgage.

If you're on a fixed deal you want see any real benefit, but when you come to remortgage yo may be offered better products and/or be saving money on a daily basis

Think of it this way - it worked out i was paying £11 per day in interest when i was on my 6% fixed mortgage, now i'm on the standard variable rate it's about £7 per day interest, but every time you pay something off the mortgage that £7 might reduce to £6.80 and you're actually saving yourself 20p per day, for the life of the mortgage.

Fortheloveofmoney

We were overpaying the mortgage until about a year ago. We stopped as we could get a higher rate on savings and also we needed the mortgage to be as high as possible as we wanted to port our great 0.27 above base rate mortgage to a new property. We set the amount aside each month still so the savings are growing instead.

We only started to overpay once we had 12 months worth of expenses in the bank. It did take a while to get there and during that time we've had a massive 60% drop in income due to redundancy, maternity and long term illness. I am really glad we've managed to save it though as it's given me huge peace of mind. I personally think it's more important to have this first.

I don't know whether it is the norm to overpay. I would say amongst my circle of friends and family it's probably only about 30% that do.