Overpaying the Mortgage - One month at a time

garfy1

Here goes:-

We are a family of 3 (soon to be 4) and have recently started on the money saving journey.

I am self employed taking home anywhere between £1.8k and £2.5k per month.

The wife is employed and earns roughly £18k per year though she is about to start maternity and we would like her to work less hours when she returns to work next summer.

We have recently cleared all of our debt and are fortunate to have saved around £20k which we have in various TSB and 123 current accounts. We have a current mortgage of £77600.00 on our property which is valued at roughly £97500.00, 17 years remaining. Current interest rate is 2.5% and we can make overpayments of up to £500 without penalties.

Around 2 years ago when we came off the high fixed rate our payments dropped from £650pm to around £420pm. In hindssight we should have kept the payments the same and overpaid but hey ho.

Over the next few days i will be setting up online banking with my mortgage account to make it easier to overpay £50-£100 whenever we have anything spare.

Long term our plan is to build up enough equity in this house and use it to move to our forever home in around 5 years time.

Realistically i think it will be possible to average overpayments of anywhere between £200 and £300 per month, this should put us in good shape to be able to move to a bigger house nearer to better schools in around 5 years.

Wish us luck!

garfy1

A rare weekday off work today so todays job is to cancel our £1000 overdraft with santander (saving £20pm) and setup a 123 account to receive the cashback from paying our monthly direct debits from there.

Ill also be going through and checking that our savings are in the best accounts possible as i suspect that some of the rates have expired and i lazily havn't checked for a while.

The Mrs has gone to Aldi for the weekly food shop and ill be taking the car for roughly £100 worth of urgent repairs.

JimLad

Good Luck with your Journey!

I thought about moving our Joint account to a 123 account but the monthly fee puts me off at the moment

AFK_Matrix

JimLad wrote: »

Good Luck with your Journey!

I thought about moving our Joint account to a 123 account but the monthly fee puts me off at the moment

If you have direct debits you can transfer then the fee would be easily covered JimLad. I have a 123 account and with my DD's I actually make money

JimLad

AFK_Matrix wrote: »

If you have direct debits you can transfer then the fee would be easily covered JimLad. I have a 123 account and with my DD's I actually make money

More than £5 a month? Thats what we get from Halifax for paying in over 1k a month

tanjatucker

JimLad wrote: »

More than £5 a month? Thats what we get from Halifax for paying in over 1k a month

Yes, you should do. Remember you also get interest on the balance if over £3000, so you should get a minimum of around £10 a month. I have near the top end of the interest paying balance in my account (£20K) and receive around £45 a month, around £5 of which is cashback for my direct debits. Well worth it imo! I also use the 123 credit card which pays 3% on fuel and the monthly fee for this is refunded in the first year if you have a 123 account. That gets me another £8 or £9 a month cashback for money I have to spend anyway.

Eta: I also have a Halifax Reward account for the £5 a month. Nothing stopping you having both

Good luck on your journey Garfy.

garfy1

^ thanks for the welcomes guys.

So yesterday wasn't too bad ££ wise after all. The Mrs only spent £40 on pre-planned meals and the urgent car repair only cost £20 and not the £100 I'd budgeted, winner.

Quick question for you that have been overpaying the mortgage. Currently we owe £77600 and are on nationwides tracker rate of 2.5% making our payments £469.00 per month and 17 years to run. If I were to overpay the maximum £500 for the next 8 months, how will this effect the £469.00 set payment? Am I right in thinking the daily interest will be lower so therefore the £469.00 will reduce?

JimLad

garfy1 wrote: »

Quick question for you that have been overpaying the mortgage. Currently we owe £77600 and are on nationwides tracker rate of 2.5% making our payments £469.00 per month and 17 years to run. If I were to overpay the maximum £500 for the next 8 months, how will this effect the £469.00 set payment? Am I right in thinking the daily interest will be lower so therefore the £469.00 will reduce?

With ours (santander fixed) we have the option of keeping the payments the same and reducing the term, or reducing the payments and keeping the term the same. When we make an overpayment we always keep the payments as they are. This way more of the payment is going on capital repayments as the interest is slightly reduced with each overpayment.

garfy1

JimLad wrote: »

With ours (santander fixed) we have the option of keeping the payments the same and reducing the term, or reducing the payments and keeping the term the same. When we make an overpayment we always keep the payments as they are. This way more of the payment is going on capital repayments as the interest is slightly reduced with each overpayment.

Makes perfect sense, thanks Jimlad. Suppose I need to speak to Nationwide to make sure they take the standard £469.00 then rather than taking less and keeping the term the same.

Hurdler

My tracker allows me to reduce the monthly payment but only if I pay over 3x the current monthly amount (and it keeps the term the same) but I was a little too clever and would only round it up so a couple of times it didn't reduce the monthly amount and was just treated like an overpayment!

So now I have to do 3x + what I work out the monthly interest to be so there can be no doubt.

garfy1

So today was a very good day.

An electrical item that I bought 11.5 months ago recently broke. In the past id usually have thrown it in the bin and bought a new one, however.......a 5 minute phone call to the manufacturer today has secured a full refund of £128.00. Winner. I purchased a replacement for £35 and the difference will be overpaid on the mortgage this month.

I also received my login details for my online access to my mortgage account and set it up to reduce the mortgage term after overpayments, I can see this getting addictive!!