what should I do?

iwilldoitthistime

Hi

my situation - last year I consolidated all my debts and added them to my mortgage (I know - not the best thing to do, but I hadnt discovered this site then, so didnt know!). I paid everything off and now have no cards, loans etc, and Ive just got two lots of bank charges back, so my overdraft is also now paid off. I have cut all the cards up, and really changed my way of thinking - I wont have debt EVER again. I have about £5k in savings, but this is for my next car (probably). So I feel that Im in the best situation Ive ever been in my life - or at least since i was 18!

my problem - what should I do now? I have enough money left each month to either save, or overpay my mortgage by approx £200. I would like to move in the next couple of years (children outgrowing the house), so would I be better off getting the existing mortgage down, or saving to add to a deposit for the next move? My mortgage is currently approx £110k on a £140k house.

Any advice would be welcomed!

ailuro2

Overpaying on your mortgage will leave you with more money in your house to go towards the next home.

Unless of course you are on a very low rate of interest in a fixed deal, then it usually works out better to overpay on your mortgage.

Make sure your pension is sorted out too before you get any older, if you haven't already.

£5k is a nice buffer to keep in a higher interest savings account for a rainy day/new car eventuality.(Although with our mortgage I'd be allowed to keep it in the overpayment fund and take it out when I needed it- depends on the individual mortgage)

Conor_3

This is advice I got from the debt recovery department of my mortgage company. The CS drone directed my call there by mistake because I don't think he could grasp the concept of someone actually wanting to increase their payments! The guy in the DR dept was extremely helpful and gave me this advice to save him possibly needing to write to me in the future because I'd overcommitted myself.

I was told:
Stick the £200 a month into a high interest account and pay a lump sum off (no more than the maximum you're allowed to without penalty) every year. That way, if there's a tight month, you don't have to pay the £200.

If you agree higher monthly payments with the mortgage company, they'll want that every month regardless of whether you can afford it or not and if you miss/are late with the payment, the charges will write off any savings you'd have made.

As I say, this was from the debt recovery bod at my mortgage company so I thought it was worth listening to.

ailuro2

But Iwilldoitthistime has savings to dip into now, is in a great place in that respect, if a tight month comes along the mortgage still gets overpaid,the savings get dipped and replaced the next month by being extra careful the next month.

I don't believe any of us should run that close to the wind with overpayments anyway that we would struggle to make the repayments.We need to live a bit too. Any spare money will of course go into the savings account and can be added as a lump sum.The sooner the money goes into the overpayment fund,the sooner it is reducing your mortgage.Leave it to build up in an account and before you know it you're in Florida with the kids and sod the mortgage.:p (Well I would be tempted anyway)

iwilldoitthistime

thanks for the advice - I can overpay on my mortgage by over £200 pm without penalties, so if I up the standing order, its under my control not theirs - especially like you say, if I have a month where we are a bit short. I think the temptation would always be there if it was in a savings account to book a holiday, get a new kitchen etc, so maybe thats not for me!

So - if I ask to overpay, do i just tell them that I want to pay it off the longer part of the mortgage? I used an overpayment calculator and it said that if I overpay by £130 pm on the longer part, it will reduce to almost the same time frame of my shorter part (if that makes sense??) If i overpay it by £200 it would reduce the longer part to 12 years. So as long as I overpay by at least £130, the mortgage should finish in total in about 15 years - which would be great!

My mortgage pig starts here (just need to get one!!)