Substantially overpaying mortgage query !

myk3

Not sure what the fuss is all about here.

go get a fee free life time tracker mortgage from HSBC @ 2.69%. This will allow you to over pay as much as you like at any time without fees. There is also no exit fees if you wish to transfer to another lender in the future.

This as you stated will be around £1500 per month over a 10 yr term. if you then overpay £3000 each month you will have your mortgage finished in around 3 years.

I can assure you that within this time interest rates will do !!!!!! all. If there is any rise it will be negligible to your loan value especially if you are overpaying £3000 per month...

ValHaller

nirish wrote: »

The drawback of this as far as I'm concerned is that the mortgage would be still be paid over the full term and would therefore be subject to any (likely) rise in interest rates in the incoming years.

My plan was with large overpayments to significantly reduce to total owed while rates are at this remarkable low.

Would you agree with this ?

My situation is 200k deposit, 150k mortgage required.

Considering 10yr mortgage which equates to monthly payments of approx £1500.

I would like to be able to pay £3000+ a month and cut this time in half but not be committed to that amount in case my situation changes.

Does this seem reasonable and what mortgages are out there which allow unlimited overpayments ??

An offset addresses all of these issues - the problem is your understanding of how it works. Once you have paid the total owed into the offset, the mortgage is paid off.

DevilsAdvocate1

I have an interest only offset mortgage with First Direct. I took it out over 20 years. It is also on a 10 year fix rate, but I don't think they do this anymore. I had to be a customer of First Direct for a certain period before this deal was open to me.

Obviously, I don't want to be left with a big balance in 20 years time, so I worked out how much I would need to pay if it was a repayment mortgage. I currently pay this amount plus an additional £50 every month as a minimum. At the end of the month, whatever is left in the current account goes into the mortgage. This is usually between £500 and £1000.

The reason I took out an offset mortgage was to offer maximum flexibility, so that if my husband was made redundant we could manage. When we took this mortgage out I was not working, though I am now. Had he been made redundant we could manage with paying just the interest.

There are no penalties for paying as much as possible into the mortgage. First Direct also calculate interest on a Daily Basis. This is worth checking before you decide who to take a mortgage out with as some calculate interest monthly and some annually. No point overpaying in January if its not going to affect your interest for 11 months.

The good thing about offset mortgages is that the money is still accessible. At one point I had just 18 more payments and the mortgage would have been fully offset. However, we decided to build a massive 2 storey extension which meant we went back to owing the full amount again. Currently I have around £13K offset.

HTH. Mandy.

dimbo61

I also have an offset mortgage and love the flexibility it offers!
You pay the Normal mortgage payment each month either Interest Only or Repayment over say 25 years and then you can build up savings in the offset accounts or overpay the mortgage every month.
We have overpaid and built up savings ( Upto £16,000) as an emergency fund.
We have saved over £75,000 in interest by reducing our mortgage from 25 years down to less than 10 years