To OP monthly or yearly

lilyp

Hi - please can someone help me with my maths?

I have a mortgage but due to difficulties getting it its in my Dads name. He forces me to OP it by £50 a month but now I am in a position to pay off between £300 and £500 a more a month. I want to OP monthly but my Dad says no I need to do it yearly.

If I save the money each month in an ISA with about 2.8% interest would this be better than paying the mortgage off monthly? or does it make little difference? The mortgage rate seems to be 2.5%. I owe £46000 over 12 years.

edinburgher

I know that it's not the specific question you're asking, but you'd be better saving the money in an ISA *in general* (i.e., saving is better than overpaying by 0.3% a year).

Whether you'd be better off OPing monthly or annually depends on when the interest is calculated - you'd need to consult the mortgage provider for that, or the documents that came from them. If mortgage interest is calculated annually, OPing once a year (just before the anniversary of the mortgage start) makes sense, but if it's calculated daily, there's no point in only OPing once a year).

That said, it sounds like a slightly unusual situation and if your dad will only continue to 'hold' the mortgage for you based on OPing when he says, you might not have any room for manoeuvre?

VoucherMan

lilyp wrote: »

I want to OP monthly but my Dad says no I need to do it yearly.

Definitely monthly. The sooner you pay it off the less interest you'll pay.

lilyp wrote: »

If I save the money each month in an ISA with about 2.8% interest would this be better than paying the mortgage off monthly? or does it make little difference? The mortgage rate seems to be 2.5%. I owe £46000 over 12 years.

If the interest rates you've given are correct then you may be better off saving as much as you can in the ISA. Then if/when the mortgage rate becomes greater than the ISA interest rate you could use the savings to pay off a lump sum. (If you manage £500 every month you'd have too much for the ISA so the surplus may as well go to pay off the mortgage)

I'd check to make sure there are no charges for making a lump sum payment first. Also it's advisable to keep an 'emergency fund' in the savings.



That's my view anyway. No doubt others will be along later.

lilyp

Thanks for your answers I had a look at Martins should you OP with savings calculator and it said yes.

Yeah its an annoying situation. Dad is very stuck in his ways and doesnt really listen to me. I dont really have access to the paperwork. It is a Barclays mortgage to they tend to work daily or annually with their interest?

I guess my question is if it is daily and I pay £500 a month how much will I save compared to paying a £6000 OP at the end of the year? Can anyone help with the maths?

davenport151

https://forums.moneysavingexpert.com/discussion/4256941
Check out the link above for a similar post recently. Might be of help to you.

firesidemaid

is the mortgage in your dad's name or is he just the guarantor? whose name is on the land registry?

i would want to save the money in my own account until i had enough to pay off the entire loan or to transfer it in my own name.

lilyp

It is completely in his name - it is actually a mortgage on his own property which he reluctantly took out because I could not get a mortgage. I already over pay around £50 a month which he keeps in his account and then over pays with any extra at the end of the year.

I am planning to pay my extra OP money into my savings and give him a chunk at the end of the year. I dont think he will try to rip me off or anything - he is my Dad afterall - he just thinks I am clueless about money because I have got into trouble in the past.

Next time I see him I am going to get him to dig out the paperwork and I will make a note of all the important stuff. When I start handing over thousands of pounds he might start taking me seriously.

happycamel_2

OP, sorry to put another angle on this but ease make sure that you know what would happen if your dad were to die suddenly, especially as if the property and mortgage are in his name it would form part of his estate. Money that you contributed would be viewed as a gift to him unless there is specific legal provision. Check out the inheritance tax implications and his will.