How soon can I pay off my mortgage?

dm281

I have 35 years remaining on my mortgage, and I currently owe 82k. My interest rate is 5.99%.

My mortgage permits me to overpay by up to 5% of the remaining balance per year.

I can afford to overpay by up to £400 per month.

Assuming the interest rate stays the same, how soon can I pay off my mortgage?

Cheers
D

amnblog

Assuming the interest rate stays the same you may be paying tens of thousands too much through not reviewing your rate and finding something more competitive.

lee111s

dm281 wrote: »

I have 35 years remaining on my mortgage, and I currently owe 82k. My interest rate is 5.99%.

My mortgage permits me to overpay by up to 5% of the remaining balance per year.

I can afford to overpay by up to £400 per month.

Assuming the interest rate stays the same, how soon can I pay off my mortgage?

Cheers
D

Who are you currently with? How much is your house worth (so we can work out your LTV %age).


6% is a huge interest rate in todays market, are you currently on a fixed rate or the lenders SVR? If you're on the SVR you can normally make unlimited overpayments.


There's a mortgage overpayment calculator on this site, you can input your data and it provides a pretty little graph showing the difference making overpayments will make.


I'd suggest however you let us know the answers to my questions and use that information to perhaps switch lender (if possible) as you'll be able to save yourself thousands of pounds in interest.

dm281

It's my first mortgage, I have 2 years left on the fix, and when I took it out I had some adverse credit.

I'll have no adverse credit at the end of the fix so will hopefully secure a more competitive interest rate then.

I understand it's not a competitive interest rate at all - but it's less than what I'd be paying rent and I've managed to get my foot on the ladder.

LTV is 87%.

lee111s

so as it stands you can pay off 5% of £82,000 which is £4100 (this year, obviously next year it'll be less).


This works out at just over £340 per month overpayments.


You'll need to speak to your lender to find out when the "5% per year" is applicable from. Some lenders take it from the mortgage start date and the subsequent anniversary, others from Jan 1st, some even from April 1st.


One thing you can be sure though, overpaying, especially at such a high interest rate, will make a huge difference, especially when you come to remortgage in a couple of years time.


There's also nothing to stop you saving the extra £60 you can afford to overpay in a side pot, then when your fix rate ends, you can pay that lump off your mortgage. Often when you're out of a fix rate, all overpayment limitations are removed.

HappyMJ

dm281 wrote: »

It's my first mortgage, I have 2 years left on the fix, and when I took it out I had some adverse credit.

I'll have no adverse credit at the end of the fix so will hopefully secure a more competitive interest rate then.

I understand it's not a competitive interest rate at all - but it's less than what I'd be paying rent and I've managed to get my foot on the ladder.

LTV is 87%.

Seriously...you are paying less in mortgage interest costs at 6%, regular property maintenance, buildings insurance and you've taken into account the interest you're not getting on the deposit you had saved and you're still paying less than you were in rent? Where do you live I want to invest in your town.

dm281

Really helpful advice, thanks! Especially the idea about putting the surplus £60 aside.

My problem with the mortgage calculator was that I always want to overpay the most I possibly can and with the 5% rule, it couldn't factor this in.

dm281

HappyMJ wrote: »

Seriously...you are paying less in mortgage interest costs at 6%, regular property maintenance, buildings insurance and you've taken into account the interest you're not getting on the deposit you had saved and you're still paying less than you were in rent? Where do you live I want to invest in your town.

Yes - by far tbh.

A £470 mortgage beats the £600 rent I was paying, all day long, living only 10 doors away.

And the surplus money each month I was saving for a deposit, now goes into my own savings account for a rainy day/maintenance. :beer:

I live in Liverpool.

HappyMJ

dm281 wrote: »

Yes - by far tbh.

A £470 mortgage beats the £600 rent I was paying, all day long, living only 10 doors away.

And the surplus money each month I was saving for a deposit, now goes into my own savings account for a rainy day/maintenance. :beer:

I live in Liverpool.

Why don't you consider a BTL? You know the market...if you can get £600 a month for your property and only pay out £470 then you're doing really well. I'd look into that. BTL mortgages also tend to interest only so the £470 payment would be reduced even further giving you much more profit. You don't need any of your own money you can refinance your existing property to raise the deposit...or even take out a personal loan.

My house is worth £150,000 and I charge £600/month rent and I think that's a really good return. If you can buy one for under £100,000 you're onto a winner.

dm281

HappyMJ wrote: »

Why don't you consider a BTL? You know the market...if you can get £600 a month for your property and only pay out £470 then you're doing really well. I'd look into that. BTL mortgages also tend to interest only so the £470 payment would be reduced even further giving you much more profit. You don't need any of your own money you can refinance your existing property to raise the deposit...or even take out a personal loan.

My house is worth £150,000 and I charge £600/month rent and I think that's a really good return. If you can buy one for under £100,000 you're onto a winner.

I would really love a BTL; however, with some adverse credit and 87% LTV on my existing home, and not the largest of incomes at present, I really think I'd struggle to gather the 30% deposit I would require.

dm281

This really does show the disparity across the UK, I was paying £600 a month rent to live in a house worth £110k Max - as is the person living in it after me.