Penny by penny...brick by brick!

PennyJar

Hi all,

Will be doing a post about this weeks progress shortly...but in the meantime have a question for the more experienced MFW forumites...

Is it better to make regular OPs, or to make a lump sum at the end of the year? Realise that with a lump sum, if in a savings account it would generate additional interest to put towards the OP, but besides that is there any other benefit for opting to do one, rather than the other?

Or would they both reduce the term in exactly the same way and save the same amount on interest.

E.g. Paying additional £500 monthly vs paying £6000 in a lump sum....perhaps it's one for :money: or is the same and I'm just over thinking things

Thanks so much,
PennyJar

MissCreative

I'll let a more experienced MSE member get into details, but from what I know, it depends whether you have interest calculated daily, monthly or yearly.
If it's daily or monthly, then doing a monthly payment could be better, but if it's yearly and you can get a higher interest rate in a savings account than your mortgage, then that may be the way to go - as long as you don't touch the money of course! :rotfl:
I'm currently looking into 5% and 6% current accounts so if anyone can advise, I'd be interested in knowing too

abi_a_mfw_mum

Hi Penny Jar, it also depends on your mortgage rate. After I started a diary we've switched to not overpaying the mortgage but saving in high interest savings accounts instead. We do have a virtual 'mortgage overpayments ' envelope so we're setting aside the money for the mortgage. We have a very low interest rate on our mortgage and can make unlimited overpayments so our money is currently earning significantly more in savings than if we overpaid and I know that I have the option of paying off a large lump sum later if needed.
You may also need to check your mortgage T&Cs as from reading other diaries it seems that some mortgage providers treat large overpayments as reducing the term of the mortgage instead of the balance. Worth checking if that's the case with yours.

PennyJar

Thanks for the info - will give Santander a call to check how my interest is calculated.

So if daily/monthly - OP monthly (my account shows interest being added monthly)
If annually - OP annual with lump sum savings pot.

I know I asked them to send me a form to declare that whenever I make an OP that they reduce the term of the mortgage.

PennyJar

abi_a_mfw_mum wrote: »

You may also need to check your mortgage T&Cs as from reading other diaries it seems that some mortgage providers treat large overpayments as reducing the term of the mortgage instead of the balance. Worth checking if that's the case with yours.

Thank you - just to double check it's the term of the mortgage I need to reduce when OPing in order to save money on the interest, not reducing the monthly payments. OPs would then naturally reduce the balance?

Sorry Abi - still all new to me :rotfl:

abi_a_mfw_mum

I'm not pretending to be an expert, I'm still relatively new to it myself!
Whether you want the term or the payments reduced is up to you. If you're disciplined enough then if the payments reduce you can just overpay more, to increase the amount of capital you pay off. This means you're not tied in to a shorter term, which might be harder to extend if you ever needed to. On the other hand, reducing the term means you'll automatically be paying off more capital, making it easier to manage.

PennyJar

Thanks abi,

I've checked and they calculate my interest monthly - so will be paying OP monthly, but if OK would you provide scenario of how I could potentially reduce my monthly payments and pay more capital please. Good to know I have options....

PennyJar

PennyJar

Hi everyone,

Thanks so much for all the advice - there's still so much to learn and it's been great picking up some useful tips before I embark properly on my OP journey :T

Nearing the end of week 1 and thought I'd give a quick update of what I got underway this morning:

1) Contact lenses - unfortunately I wear ones that are sold direct to chain from the manufacturer, however decided not to give up completely yet and will be ringing other chain opticians tomorrow to see if they could offer me a like for like product, for a better price??

2) Gas & Electricity - Using a great MSE tip, I contacted Swalec and asked whether they would be able to install a free smart meter - and they said YES! So chuffed with that...being sorted in September. Also our local B&Q has a massive sale on - so may check to see if they have any LED lights going cheap tomorrow.

3) Sort DD clothes to sell - awe hardest thing I did today was going through her little clothes as everything has a memory, but did start organising and bundling some together which I felt I could part with, in readiness for resale.

PennyJar

PennyJar

DDs injections today round three...nightmare!

PennyJar

Hey folks,

Tried really hard to get my lenses cheaper today, but turns out Specsavers is already the best deal I can get on my lenses - so no savings found unfortunately. But on the plus at least I know I haven't wasted any money by paying too much for them - phew!

PennyJar