Should I pay off my mortgage discussion

portlandboy

Hi,
I'd just like to add another angle to this discussion. We have now finished our mortgage but while we were paying it we always managed to pay extra each month. Every year the building society used these overpayments to reduce the overall loan. Everything was working fine until I applied fro a credit card.
Experian use the same code on their credit reports for both over-payments and under-payments! They class both as "payments that differ from the terms agreed".

Thus by being in credit on our mortgage we were seen as a potential risk for credit!
Experian did allow us to add a note of explination to our report, supported by the building society but, they insisted that the details remained on the report as they were not wrong!!:mad:

Claireliew

I have read the article on whether it is worth repaying your mortgage but am still a bit confused about how it applies in my situation:

I have already overpayed by the permitted charge-free 10% this year and to make further overpayments would incur a 1% penalty charge on any amount overpayed (e.g if I overpay by £500 per month there would be a £5 charge per month).

The mortgage rate is 2.79% at the moment.

I have not started saving in an ISA this financial year.

Should I repay or save?:o

kiran_kaur

Hi,

my husband and i brought our house for £250,000 in september 2007. We paid £37,500 deposit and have a repayment mortgage. We are no longer in a fixed term contract. Our interest rate is bank of england rate plus 1.99. Im not sure exactly what the rate is... We currently have savings of £20,000. £8,000 is my cash isa with natwest. My husband does not have a cash isa. He believes we would be better off paying £20,000 off our mortgage, i think i should keep my cash isa and pay £12,000 off the mortgage. We do not incur any penalty for overpayment.

What do you all think would be better?

mummyofonechild

I think you should have at least 3/6 months emergency fund before considering overpaying. Can you get the overpayments back at a later date if circumstances change?

curlygirl1971

Agree with mummyofone......

You need an emergency fund and especially if you cannot subsequently get back OP's.

I calculated how much my emergency fund should be by looking at all of my expenses and deciding what my outgoings would be if I was unemployed (unemployed outgoings being less than employed outgoings as you naturally cut back / commute less).

If you have somesort of Mortgage Protection (ie in cases of Redundancy or Illness) then perhaps you would want a lower emergency fund.

curlygirl1971

claireliew wrote: »

I have read the article on whether it is worth repaying your mortgage but am still a bit confused about how it applies in my situation:

I have already overpayed by the permitted charge-free 10% this year and to make further overpayments would incur a 1% penalty charge on any amount overpayed (e.g if I overpay by £500 per month there would be a £5 charge per month).

The mortgage rate is 2.79% at the moment.

I have not started saving in an ISA this financial year.

Should I repay or save?:o

Have you tried putting your figures into a Mortgage Calculator

I use Locoblades (MSE Username) and I'm pretty sure when I originally set it all up it gave you the opportunity to adjust for charges

If you search for his username you will find his thread - his calculator is in the first post

kiran_kaur

i kinda figured that my cash ISA would be our emergency fund... i don't think we could recover the over payments if we needed it. what do you think?

kiran_kaur

also, can anyone clarify? i think i read on this forum that if you make monthly overpayments on your mortgage, then credit reference agencies score you badly- that they don't differeniate between overpayments or missed or under payments... is this correct?

curlygirl1971

kiran_kaur wrote: »

i kinda figured that my cash ISA would be our emergency fund... i don't think we could recover the over payments if we needed it. what do you think?

Your cash ISA is £8000. Sounds like a good emergency fund to me - it will cover a new boiler, unexpected house or car repairs or would cover you for several months unemployment. But it depends how much security you like / your circumstances / what you want your emergency fund should cover. Some people would recommend that you have 6 months of expenses in your emergency fund this means you have 6 months X £1333 of expenses in the fund if something happens and you can't work. Does this sound realistic to you? (Don't forget that whatever savings you have will affect benefit entitlement - I think £6k maybe the threshold but if you are bothered by this then check it out)

Your current rate on your mortgage is BOE+1.99 = 2.49%.....and this is likely to only go up! According to Martins 'Should I overpay' mortgage tool you need to be earning at least "3.1% as a basic rate taxpayer,4.2% at the higher rate" on your savings to make saving more worthwhile than OP'ing. So if you happen to be getting 5% on your savings whilst paying 2.49% on your mortgage, why not continue saving until things change - and then use the savings to make OP's

Best of luck

kad1

Hi all.

i just want to get some clarification on a point in the overpayment guide. it says:

Money put towards the mortgage only counts after the calculation [interest] is made; so don't put your money in too early as it won't have an impact and you'll miss out on interest you could’ve earned in a savings account.

I know my mortgage with Narionwide is calculated monthly but I don't understand the bit about why ill-timed overpayments may not make any impact? I'm a bit worried now as I have made overpayments in the hope to chip a little extra off the mortgage? When exactly should I make overpayments then? Thank you in advance for your advice/replies.