to overpay or not?

D4nny

hi guys
me and my better half have been in our house just over a year now,we are getting married in march 2016 and have the money to pay for this so we will not be in any debt.we both work but have a pretty low joint income compared to alot of people i belive but we are wanting some advice.
we have our mortage through natwest and% we got it throught the help to buy scheme we have just last month had our 1st year statment through.we bought our house for £90000 and only put down a 5% deposit (we could of afforded more but thats another story)
so we borrowed £85000 over a 27 year 11month term
so now our current balance is ££84328.65 and 26 yrs & 11 mnths
we are in a 5 year fix wich ends 31-03-2019 and our intrest rate is 5.49%.
monthly payment is £499.39
we could afford to pay an extra £50 a month and according to
the natwest overpayment calculator it would reduce our term by 4 yrs, 11 mths and save £16,199
all we want to know is would it be worth doing this? or would we be better putting the money to better use elsewhere?

Thrugelmir

If you can comfortably afford to do so overpaying the mortgage makes financial sense. You'll struggle to match a guaranteed return on your savings anywhere near 5.49%.

Mojisola

D4nny wrote: »

me and my better half have been in our house just over a year now,we are getting married in march 2016 and have the money to pay for this so we will not be in any debt.

we both work but have a pretty low joint income compared to alot of people i belive but we are wanting some advice.

we could afford to pay an extra £50 a month and according to
the natwest overpayment calculator it would reduce our term by 4 yrs, 11 mths and save £16,199

Thrugelmir wrote: »

If you can comfortably afford to do so overpaying the mortgage makes financial sense. You'll struggle to match a guaranteed return on your savings anywhere near 5.49%.

If you have an emergency fund as well as the wedding costs covered, go for the overpayment.

If you don't have an emergency fund, put savings into that first.

D4nny

Mojisola wrote: »

If you have an emergency fund as well as the wedding costs covered, go for the overpayment.

If you don't have an emergency fund, put savings into that first.

we have wedding costs covered complelty wich is a good thing.

emergency funds? as in to be able to cover our monthly outgoings? if so we have at this moment in time around one full months cover and then one other mortage payment amount sat in an account.would it be more advisable to build up our emergency fund than to pay the extra off the mortage at this moment in time?

Mojisola

D4nny wrote: »

emergency funds? as in to be able to cover our monthly outgoings?

if so we have at this moment in time around one full months cover and then one other mortage payment amount sat in an account.

would it be more advisable to build up our emergency fund than to pay the extra off the mortage at this moment in time?

One month's funds is a very fragile existence. I would want at least three months before overpaying the mortgage (and most advisers suggest six months to a year).

getmore4less

IT's down to risk
I split it into two

Emergency cover is to cover the unexpected bills off budget, over time these get budgeted so the amount needed goes down, this is more about short term cash flow and planning.

Disastercover is about loss of income, so what are the risks of one or two job losses, time to get a new job.

If both jobs are high risk and not easy to get I would err for 12 month expences and/or benefits.

if a bit easier and risk of both at the same time is low 3-6months including the lower income.

if both fairly secure or easy to replace less may be worth the risk.

review you budget for the lowest you could live on.

D4nny

our 12 months outgoings would roughly be £15000 without sitting down working it out exactly but i mean we could cut that down if need be by that we dont need to have a land line and internet ect we dont need to do a food shop where we do so we have always got ways to cut down.after the wedding then i think that we are going to be on a massive save to get a good few grand maybe 6months worth into an account for disaster times if ever to occur.

Thrugelmir

Lenders are duty bound to assist borrowers in time of financial difficulty. So there's the real possibility that lenders will allow a switch to interest only for a period of time. Therefore reducing the debt owed has an all round positive benefit.

I agree that an emergency reserve should exist in any event. As there'll always be unexpected financial expenses that crop up.

Mojisola

D4nny wrote: »

our 12 months outgoings would roughly be £15000 without sitting down working it out exactly but i mean we could cut that down if need be by that we dont need to have a land line and internet ect we dont need to do a food shop where we do so we have always got ways to cut down.after the wedding then i think that we are going to be on a massive save to get a good few grand maybe 6months worth into an account for disaster times if ever to occur.

If you fill in a statement of affairs (SOA) and put it on the Debt-free Board, people will give advice about how to reduce outgoings. Every £ you don't have to spend out can then go into your rainy day fund.

pete-20-11

What do people think of having an empty credit card as part of your reserve?

I guess there is a small risk the company could cancel the card or reduce your limit if they found out you lost your job?

squeeks

An empty credit card is great, but not a substitute for an emergency fund. Some things can't be put on the credit card and you only get roughly a months grace with a credit card. Come the second month, things are going to start to get really bad.