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Using an Overdraft to overpay mortgage?
Robochick
Posts: 27 Forumite
Hi, first-time buyer here, started my journey in June this year.
I've just been playing around with the overpayment calculator, and reckon I could afford to overpay by £300 although it could be tight every now and then as I'm self employed. My bank account that I use for all my household bills has a generous limit on it, that I never use and an interest rate of 1.53% if I do use it.
My mortgage interest rate is 4.99& for the first two years, then drops to 3.99.
Would it be stupid of me to increase my mortgage overpayment a bit more to say £400 by utilising my bank overdraft
Any advice gratefully received.
Thank you.
I've just been playing around with the overpayment calculator, and reckon I could afford to overpay by £300 although it could be tight every now and then as I'm self employed. My bank account that I use for all my household bills has a generous limit on it, that I never use and an interest rate of 1.53% if I do use it.
My mortgage interest rate is 4.99& for the first two years, then drops to 3.99.
Would it be stupid of me to increase my mortgage overpayment a bit more to say £400 by utilising my bank overdraft
Any advice gratefully received.
Thank you.
0
Comments
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A more sustainable process would be to overpay regularly when you can, rather than dipping into your overdraft I would say. Also, if you suddenly need some cash, what would you do then? The overdraft is really there should there be a problem!Feb 2012 - onwards MF achieved
September 2016 - Back into clearing a mortgage - Was due to be paid off in 32 years in March 2047 -
April 2018 down to 28.00 months vs 30.04 months at normal payment.
Predicted mortgage clearing 03/2047 - now looking at 02/2045
Aims: 1) To pay off mortgage within 20 years - 20370 -
I suspect 1.53% is the monthly interest rate on your O/D facility. Perhaps you should check?
0 -
originalmiscellany wrote: »A more sustainable process would be to overpay regularly when you can, rather than dipping into your overdraft I would say. Also, if you suddenly need some cash, what would you do then? The overdraft is really there should there be a problem!
@originalmiscellany: Thank you for the advice. I have £400 a month going into an ISA as well, which was how I saved for my deposit.
@yorkshireboy: thanks, I checked - it's 1.53% monthly if I use it (over the first 'free' £25 - oh, the generosity!) which works out to an AER of 19.4%0 -
How much interest do you get on your ISA? Maybe pay 300 into ISA and use the extra cash on mortgage OPs. Or, once you have a proper safety cushion in the form of a few K in said ISA, just concentrate on the mortgage should early repayment fees etc not be an issue...
Obviously the overdraft is much much much more expensive! Don't touch it!0
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