Should I pay more than my monthly payments?

vb3d

Hi all,

I am considering to pay early payments toward my mortgage to reduce the overall interst I am paying.
With the inflation going down, and not the clear economic situation, I am not sure if paying this money is a correct decision or not.
In case of a big crisis coming that will cause everyone to lose their houses, I don't want to be in a position where I lost more money than I should by paying more toward my mortgage, I rather save this money in case of a crisis coming.
So, which is better in the current economic climate, save the money or clear the mortgage to save on interest paid?

Thanks in advance

betmunch

If you lose your house you will be paid any additional money after the debt is cleared so you wont lose any overpayments you make.

However if you need liquid funds at any point between struggling and the proceeds of the repossession being realised you wont have them as they will be tied up in the house.

Only you can decide if the interest saved is worth risking not having the cash available when repossession looms.

Its worth noting that keeping the funds you would be overpaying in your possession could be used to stave off the repossession which could be enough to get you through the tight spot youre expecting

stator

vb3d wrote: »

Hi all,

I am considering to pay early payments toward my mortgage to reduce the overall interst I am paying.
With the inflation going down, and not the clear economic situation, I am not sure if paying this money is a correct decision or not.
In case of a big crisis coming that will cause everyone to lose their houses, I don't want to be in a position where I lost more money than I should by paying more toward my mortgage, I rather save this money in case of a crisis coming.
So, which is better in the current economic climate, save the money or clear the mortgage to save on interest paid?

Thanks in advance

You need cash savings to cover all your living expenses for at least 6 months, some people will say 12 months.
Don't overpay your mortgage until you have a good savings account built up.

vb3d

Thank you for the quick replies
I have good saving, to cover 12 months I guess in case of emergencies.
But what if my house price drops below my mortgage loan? Then I won't get anything back, my deposit and any overpayment they will all be lost, that's what I am worried about if I make any overpayments really.

M5captainmac

vb3d wrote: »

Thank you for the quick replies
I have good saving, to cover 12 months I guess in case of emergencies.
But what if my house price drops below my mortgage loan? Then I won't get anything back, my deposit and any overpayment they will all be lost, that's what I am worried about if I make any overpayments really.

If you have 12 months savings to cover emergency then rather than worry about what may or may not happen in the future work on overpaying the mortgage to get it paid off earlier. You have a year of savings funds to get you through should anything happen, try and make sure you grow that money safely where you can, utilising isa allowances or shifting between savings accounts.

If you get the mortgage paid off early, it really doesn't matter what happens to the economy as you'll always need a roof over your head! That's the way I look at it, house price movements only matter if your planning on selling or buying. Good luck with whatever you decide.

p00hsticks

vb3d wrote: »

But what if my house price drops below my mortgage loan? Then I won't get anything back, my deposit and any overpayment they will all be lost, that's what I am worried about if I make any overpayments really.

Your mortgage company will expect you to pay back what you've borrowed plus interest, regardless of whether the house is worth more/less/the same.

If you're the worrying kind (and it sounds like you are) then the appropriate time to worry about crises and the possibility of your deposit etc disappearing in a house price crash was at the point when you purchased the house and took out the mortgage, not now.

If you have sufficient savings to last a while if you lost your job, I'd be overpaying.

dimbo61

What interest rate are you paying on the mortgage?
Overpaying the mortgage is a VERY good Idea and if you have the spare cash and No other expensive debts (Credit cards/loans/store cards?) then overpay every month.
Worrying about the economy will only give you sleep less nights.
I Love the idea of being Mortgage Free and owning my own home in Old age

vb3d

Currently is 2.89%
Thank you everyone,
I think I better start paying overpayments, to clear the debt as soon as possible, although, the way I look at it is to save on paying interests.

cns06

We took our 150k 25 year mortgage out 10 years ago and overpay (currently 2x) and its now down to 65k.
No idea what its going to save me in the long run but it should be cleared in another 5 years. Only snag is we are looking to move and we will prob start all over again!

Thrugelmir

vb3d wrote: »

I think I better start paying overpayments, to clear the debt as soon as possible, although, the way I look at it is to save on paying interests.

Little point in concerning yourself with wider economic issues over which you have no control. Clearing the mortgage earlier will free up cash for other purposes.

ACG

If you can comfortably overpay then its unlikely to be a bad decision in any economic climate. The only ways I can see it not being a good idea is:
1) If you can get a better rate in a savings account (after tax),
2) If you are going to struggle to make those payments,
3) If you get charged early repayment charges that make it not financially sound.