Overpaying mortgage - peoples experiences

Calleja

Hi all,


I'm approx. 6 months into my first mortgage. I'm interested in hearing about peoples experiences of overpaying. I appreciate that posting such a question on a moneysaving website slightly skews the responses I'm likely to receive! However, they are most likely going to be skewed in such a way that can only help me out in the long run!


Basically, I would be interested in knowing if people overpay their mortgage (it seems most people on here do, would be good to hear from those that don't/can't), and if so, when they started. I had given myself 6 months grace before I was going to overpay (just by a small amount) but as I am now planning to undertake a bigger job on the house than I expected to, I'm thinking this may not be possible. Whilst I live quite frugally, I'm not willing to sacrifice everything in my lifestyle just for the sake of the house (lets see how well that statement goes down on here....!)


I know the overall advice is probably over pay as much as you can, as soon as you can. But I'm not really looking for advice, just to hear the experiences of people who are much further down the line than me. Am I the only person who stalks this forum who doesn't currently overpay?!

Thrugelmir

There's no obligation to overpay. Really a personal decision depending on circumstances.

The one factor that is a major influence at the moment is the envitability of interest rates rates. So the lower the capital balance owed. The lower the impact of any future rate increase. Over 10 years the costs mount up.

pjcox2005

When we brought, we decided to lower both the term and overpay from the start. Good position that we cover our necessary expenses fairly easily, so just reducing disposable/frivoulous expenditure, so our view was if we never have it from the start, then we won't miss it or find reasons to delay overpaying.

Imma_Number

I didn't for my first mortgage (IO & Endowment) but I don't recall even knowing that I could.

For my 2nd house I started with £10pm before they took the first payment, & it went up not long after.

I think I did it initially to pay it off earlier and pay less in interest. I think I was paying 4.09% at the time. It was only later that I thought of it as increasing the amount of equity in the house.

By the time my first fix was up I'd over paid enough that, despite the interest rate going up by 1%, I could reduce the term by 1 year and still pay less pcm. Of course, I took the amount I was saving and added it to the amount I was over paying.

dano17439

I have been overpaying for a few years now, currently 41% of my standard monthly amount. Once its set up and you are used to paying then you soon forget about it.

Also I am on a tracker mortgage so when rates increase it wont feel so hard on the pocket

jamesd

Overpaying loses you money compared to investing, with the main UK stock market historically returning 5% plus inflation long term, around 8-9% total. It's unlikely that you have a mortgage that expensive.

Overpaying can be a good option for those who don't have the risk tolerance to use investments.

Overpaying can also be useful when it causes a move down the LTV range to allow getting a cheaper mortgage, with the interest saved on the whole mortgage, not just the extra amount paid.

ladymarmalade222

I totally agree, when you set up to overpay and it just increases your monthly direct debit it just becomes second nature. I wish I had started when I was much younger:(

We started off adding £200 overpayment onto the mortgage payment and then when we could see how quickly it was reducing it became addictive to add that bit more. We are now on the last leg of the MF journey and have six more payments to go:T

We made sure that we did not go without and still had family holidays etc but just tightened up the spending a bit until it became second nature to think "do I just want it or do I need it".

Good Luck!

puk999

I was overpaying but stopped and money now goes into stock and shares ISAs and pension pot for the reasons jamesd mentioned. I don't mind the risk. My mortgage rate is 2.5% and I've taken fairly meaty chunks out of the principal from previous overpayments so that was another reason to change tactics. In hindsight, I wish I stopped overpaying and diverted money to investments earlier.

If there's stronger signs that interest rates will rise then I might start overpaying again.

Perhaps a good strategy is to do a bit of both? For me I might settle on 80% into investments and 20% mortgage overpayments.

Calleja

Interesting replies - thank you all. I guess I never really considered investing as an option due to my ignorance on that side of things. My initial overpayment is likely to be very small indeed, which I plan to increase as other commitments end (i.e. student loan, credit card) - not that I have many of these, but I agree with the sentiment that if you didn't have it in the first place, you don't miss it. Will definitely get some advice on investment though and see if that's a viable option for me as my overpayment starts to increase.

I always find the quoting of your mortgage repayment as a percentage of your take home wage a slightly strange thing to do. So what if your payment is, say, 50% of your take home if you take home, say £5000pcm?! (which I don't by the way!) I know its just a way of trying to compare, but its not extremely helpful, is it?! It really comes down to the actual amount left once all commitments, including the mortgage is paid.


(Edit - sorry, re-read the post and don't think the poster meant the % as monthly income, rather a percentage of the payment itself. I'll read closer next time! But I still think its odd that others do quote payments as a % of take home pay!)

I am alone which doesn't help, but intend to get a lodger, so I will try and put most of that into the mortgage/investment asap.

I'm mainly interested though in when people started overpaying (the comment above 'I wish I did it earlier' was interesting). What I guess I really want to know is, am I being harsh, beating myself up about not overpaying when I'm only 6 months in?

jamesd

You're being harsh. Inflation makes overpaying easier as time goes on. The mortgage amount owed doesn't increase but wages tend to increase at a bit above inflation, so over time the amount of spare money available increases compared to the size of the mortgage balance.

ladymarmalade222

The reason I said "I wish I had started earlier" is because I now know I was totally ignorant where finances were concerned and felt mortgages payments were just a fact of life like rent when really if you can pay it off it gives you much more freedom to make better life choices later in life.

I am not saying double you mortgage payment every month, some people round up their payment to the nearest £10/£50/£100 and every bit helps.

Take a look at the mortgage calculator on this site which shows you how much interest you can save by overpaying just small amounts. I promise it gets addictive:D

I get annoyed when I think back how much of my hard earned money I have given the banks over the years through loans, overdrafts, credit cards and general poor money management. That is what I really meant when I said about I wish I had started overpaying a lot earlier.

Good luck in what you decide!

xxx