please take a look because i cant understand how overpaying would work out

lee-d

hi,
now if a mortgage of 30,000 over 15 years
was 237 a month.

or over 10 years for 318 a month,

my question is could i take it over 15 years but overpay it - instead of the 237 a month ,i overpay it at 318 instead,

would my mortgage still finish in 10 years ?
and would it be when money was tight i would just have to find the lower 237..

thank you:)

ACG

In theory yes, in practice you also have to consider how much you can overpay by. Some lenders (or some deals with lenders) either dont allow it or put a cap on how much you can overpay by (sometimes a monetary amount, sometimes a percentage).

marlasinger

Using the overpayment calculator, yes it would appear that overpaying by the £81 per month you would pay it off in 10 years.

We are doing what you are thinking of - overpaying every month, but if money is tight one month, then we just pay the minimum.

There's an overpayment calculator on this site (under Mortages/Homes on the bar at the top) where you can play around with different numbers to see the impact.

Good luck.

lee-d

thank you for your replys

marlasinger did you take out a lower mortgage knowing you would over pay it or was it a after though ,

ValHaller

lee-d wrote: »

marlasinger did you take out a lower mortgage knowing you would over pay it or was it a after though

My answer - we have overpaid - is that we took out a mortgage with the intention of overpaying. We actually took out an Interest Only mortgage without overpayment fees or early redemption charges.

We paid the interest only amount each month and as cash piled up in the current account, every 6 months or so we paid off a huge chunk. We did use a mortgage calculator to make sure that we were at least matching the amount of a repayment mortgage overall, so that we would be sure of paying off in the term. But that was never really an issue as we paid off a 15 year loan in about 4 years - putting the last few thousand into ISAs, leaving the mortgage open for a few things we plan to do. But whatever we raid out of the mortgage now, we plan to pay back within 2 years.

marlasinger

lee-d wrote: »

thank you for your replys

marlasinger did you take out a lower mortgage knowing you would over pay it or was it a after though ,

We didn't borrow to our maximum capacity, but we didn't start overpaying until about 2 years into the mortgage, as we had to spend on home repairs and other bits and bobs for our first home (furniture, etc.).

lee-d

thank you x this has been a good straight forward helpful post

lee-d

ValHaller wrote: »

My answer - we have overpaid - is that we took out a mortgage with the intention of overpaying. We actually took out an Interest Only mortgage without overpayment fees or early redemption charges.

We paid the interest only amount each month and as cash piled up in the current account, every 6 months or so we paid off a huge chunk. We did use a mortgage calculator to make sure that we were at least matching the amount of a repayment mortgage overall, so that we would be sure of paying off in the term. But that was never really an issue as we paid off a 15 year loan in about 4 years - putting the last few thousand into ISAs, leaving the mortgage open for a few things we plan to do. But whatever we raid out of the mortgage now, we plan to pay back within 2 years.

this to me sounds like very savvy spending and i like your style ,from what i understood ,you will still pay off in a normal mortgage time frame
(by your overpaying)
,but when times are hard you only have to find the bare essential interest each month, which in times of a job loss etc could mean keeping a roof over your head or loosing your home,,can better plan for holidays etc ,, if anybody could give me some idea of cons to this please let me know because this sounds ideal when i get my FIRST mortgage ,

thanks
,

ValHaller

lee-d wrote: »

if anybody could give me some idea of cons to this please let me know because this sounds ideal when i get my FIRST mortgage

I doubt there are any serious cons to it, Although as a first time buyer, your mortgage will be much more significant that mine is.

I was heavily influenced by my parents who paid off their only mortgage in 9 years when I was about the same age. There was no celebration, but it was announced and explained.

Also we did cover the maths of mortgages at school, so at age 14, I knew about compound interest. I could see that if you could match the amount of the principal you paid off on repayment in the first year with an overpayment, you ended that year in the same position you would be in at the end of year 2. (And knock a whole year off the mortgage)

In practice, on my first mortgage, I did not overpay at all - but I did have a loan from the Bank of M&D, which I cleared, then it was a case of getting a car - minimising the time I required finance, and some building and I was about ready to overpay, when I was made redundant and moved.

On my second mortgage, interest only to be cleared by my pension lump sum, I overpaid in chunks and zeroed it in 18 years, although I could have used the proceeds of another redundancy to clear it at about 10 years - but I took the opportunity to do a university course and kept the cash available and we could probably have cleared it at 14 years, although we kept it open in order to have a good record with a lender for our next property. In retrospect, we should have closed that mortgage at 14 years.

The summary is that it is not easy to get into early repayment when you start out but it gets easier as you get older and have a lower commitment. But you need to start out with the mindset and control your exposure to credit. Borrow for a house and perhaps for a car - but as you get older start paying cash for cars. Pay off your credit card in full each month and avoid payday loans like the plague,

Sorry, off topic, this is probably more for the Mortgage Free Wannabe's forum

lee-d

no it was fine and im kind of like you in that i want to apply logic to a mortgage ,most people are just happy to get a mortgage but as you know it pays to be savvy,cheers