Why do you overpay?

sampa99978

Hi all, I'm hoping to get some points of view from you lovely MFWers. I'm in the process of buying my first house and (all being well) am interested in making overpayments on my mortgage once we're all settled in. The mortgage will allow for overpayments up to 10% each year of the overall amount.

I brought up the topic to my sister and her partner last night as they've been paying a mortgage for a year now. They pretty much scoffed at the idea, saying that they didn't think it was worth limiting their lifestyle now for the sake of knocking a few years off later down the line. I should point out that they have more restrictions on overpayments than mine would, but the general idea didn't seem to appeal to them.

So my question is, what are your reasons for overpaying? Do you feel like you are having a less comfortable lifestyle because of this, or that's it's still worth it anyway?

I still feel like it's the best thing for us, providing that we are still setting aside a budget for emergency funds and holidays etc, but I was a bit surprised to hear the other side of the argument.

Memory_Girl

"Because 100% of the repossessions I work on happen to people with mortgages"

Bit cheeky I know - but I overpay cos it saves me loads of money - I mean thousands of pounds over the course of a mortgage.

MG

Seabee42

Technically I am being silly overpaying as I have a +1% tracker which means the interest rate is very low. In reality I know not all jobs last forever and you can have paid 90% of a mortgage and still loose it and for them to close you down and sell the house for naff all. So I will be happier when the debt is gone.

Angelina1

Because I hate paying the bank interest rates. Have saved thousands by over paying. not to mention when interest rates start to rise, I will have reduced the balance of mortgage to lessen the effect of interest rate rises.

Dot_Common

Because it creates a discipline where we go looking at where we spend money - and it becomes obvious where we could cut back on things that would have no impact on our life to do without. Beyond that, we can then choose how much further we want to cut, where we are deliberately choosing the lifestyle we are comfortable with, short term and long term.

If_in_doubt,_do_sums

For me, it's a way of saving for the future. A mortgage, while acceptable, is still a debt, and the quicker we can clear it the better. I just can't wait for a time when we own our house outright and don't have to pay a mortgage every month! That surplus cash can then go to help our future children get settled for the future, and the cycle will continue.

I tend to think of overpaying in the same light as saving, at least I'm starting to (I'm really only a newcomer to it).

Lois_E

I'm not limiting my lifestyle - I've never given myself the chance to get used to spending lots, so this lifestyle feels comfortable to me. I want the security of owning my home outright because I've no idea what life is going throw at me, and I don't want to pay any more interest to the bank than necessary.


OTOH, I know there are lots of people out there who feel the way you describe, so IRL I generally keep quiet about working towards being MF, and I keep things separate so nobody reading "Lois_E's" posts on here would be likely to work out who I am.

kate2954

I don't overpay as my mortgage rate is 1.6%, so I can make better use of the money in Santander 123 and nationwide current accounts with 3% and 5% interest. If interest rates start to rise or current accounts with fair interest disappear, then I will pay off mortage/overpay. This way I retain the choice, and can see how interest rates may change day by day. Remember, once its gone into the mortgage, you can't retrieve the money, and mortgages are often the cheapest form of loan available

LydiaJ

Why overpay? That's the wrong question.

Try
Why pay more (in total) than you have to?
Why have the mortgage hanging over you for longer than you have to?

If you're going to discuss it with people again, prepare a few numbers in advance, eg "If I overpay by just £50 a month, I save £9,381 in interest over the life of the mortgage, and I can think of much more fun things to do with £9k than give it to the bank in interest."

Then there's the question of interest rates. One day, nobody knows when, they will go up, nobody knows how far. The lower the mortgage when that happens, the less painful that will be.

SillySod

I overpay because I am happy to put my money into a very safe investment that returns a guaranteed, tax-free 4.2%.

More exotic investments (shares, bonds, equities, p2p lending) will be inevitable but only once the mortgage has gone.

Edit: incidentally my deal is a 10-year fix on which I can overpay 3% of the original mortgage amount every year, as well as keeping the same monthly payment. I plan to make full use of the OP facility which will reduce the amount owing at the end of the 10 year from 52% of the original loan to 15% (which will then be paid off immediately from savings).

ElusiveLucy

Because I can afford it and once the mortgage is gone I can get rid of my stressful but well paid job and get something less stressful.