Penny by penny...brick by brick!

User1489

Penny, with the monthly v annual overpayment... rule is that...
1) if you can find a savings account with a higher interest rate than your mortgage then save as you will get more interest and pay off when the savings rate is no longer higher.
2) if you can't find a savings account with a higher rate of interest than your mortgage then pay into the mortgage as this will prevent incurring future interest on your debt (mortgage) at a greater rate than your cash savings would earn savings interest.

Of course, these are cold, hard numbers.

What do YOU want to do? What works best for YOU? If your saving rate and mortgage rate are very similar, is it better for your mental health to have spare cash in savings, or better to feel like your mortgage is being dented/bamboozled? Or a combination of the two? Save half and overpay half?

Whatever you decide, GOOD LUCK!

Man v Mortgage

PennyJar

Thanks Raspitin

Makes sense...mmm probably like to get the balance down as plan to put emergency fund in place too, will look into savings rates.

Penny

PennyJar

rasputin_thorpedo wrote: »

Penny, with the monthly v annual overpayment... rule is that...
1) if you can find a savings account with a higher interest rate than your mortgage then save as you will get more interest and pay off when the savings rate is no longer higher.
2) if you can't find a savings account with a higher rate of interest than your mortgage then pay into the mortgage as this will prevent incurring future interest on your debt (mortgage) at a greater rate than your cash savings would earn savings interest.

Man v Mortgage

Just had a quick look and there is an eSaver Santander Account I can sign up to where the interest is 5%, but I can only put £200 max in per month... and I'm looking to OP by a minimum of £500. So would it better for me to OP what I can and put the rest into this account to get the extra £65 interest? Or make larger OP payments....struggling to get my head around this :rotfl:

Apologies for all the questions ::o

I noticed on your thread Ras that you were looking to make OP assp to prevent an additional 12p interest...in my position what would you do?

Many thanks
Penny

MissCreative

Morning PennyJar
Depending on how much you want in your emergency fund, you could open a separate account with high interest - TSB do 5% on £2000, and Nationwide do 5% on £2500.
That way you'll get more interest than 3% at Santander, unless of course you want to put more than a few thousand in.
But saying that you can look at this link on MSE about getting 5% on up to £30,000:
http://www.moneysavingexpert.com/savings/savings-loophole
:T

vicsmiles

HI Pennyjar
I have read all your thread, I just wanted to ask you if you are planning on going back to work after maternity leave? If you are and have to pay childcare it may be worth paying into childcare vouchers (if your company offers them) now while you are on your maternity pay, when you go onto Stat mat leave your company cannot make deductions on that so basically you would get the childcare vouchers for free. I only found this out on my second maternity but it cushioned the blow after my second maternity ended and back to paying full time childcare!
During my 1st maternity leave (7 years ago) I really started to think carefully about paying my mortgage down and so pleased I have as we now have our forever home probably 10 years earlier than we would have done!
On my last mortgage we decreased the term to 15 years and got use to paying a high mortgage, however with this property we have gone for a longer term with the aim to pay capital off in lump sums which we are saving now in the Nationwide 5% account.

PennyJar

Hi vicsmiles,

I'm fortunate that I won't need any child care as DH is currently not working and we decided to leave it at that until she starts school...but thank you for letting me know - I wasn't aware of how it works and it's always good to know these things.

I'm hope to better our LVT to buy our forever dream home...still trying to get my head around OP vs saving...if possible going to open 5% account. But will be looking to reduce term as much as possible.

Thanks again,
PennyJar

MissCreative

DH and I have decided that we'll probably sell our current flat in about 4 years and buy our forever home, so I've been working out our LTVs on various future house price haha.
Won't know what the market's like for a few years though.

Have you had a look at those current accounts at 5%?
They don't limit you to £200 a month deposits. As the link I sent you explains, you can open one, max it out, open another at a different bank, and then set up a standing order loop to cover the minimum monthly deposits they need.
I found it an ingenious idea :rotfl:
DH and I will be working on upping our emergency fund so will be doing the above over the next year or so whilst still overpaying (if the car doesn't break down again!)

PennyJar

Hi MC,

It's a great idea - the banks must love Martin lol. I plan to have a £3k emergency fund in place by Dec and will then be saving a minimum of £500 pcm for OP as well as putting aside £400 pcm savings which can be dipped into - although will be playing with figures as desperate to pay £20,000 off our mortgage as our forever home will be well within our reach then. The house we want is currently being rented, went on the market with no interest so they took it off...my DH father knows the owners and reckons we could approach when ready and avoid fees. That's the plan - plus the house is worth £290k but hoping to get for £220-£230k.

Current mortgage is £101k and house is worth £160k (we had a steal) so would be able to get 50% LVT with £20k OP...remortgaging in 2020 though...we have a higher rate at the moment as when it came to remortgage last time we had to automatically renew as my job at the time was on a fixed term contract and we were winding down our business...so our options were limited as other lenders probably would of refused us any way.

So anticipate emergency fund going in one of those new accounts and then OP1 in NatDirect '1' and OP2 in NatDirect '2'. The only caution I need to weigh up is the credit score impact this may have? So may just do one at a time, just in case.

PennyJar
:T

MissCreative

That sounds like a good plan Penny :beer:

Lumina

Hi PennyJar -
Good idea to have an emergency fund in place, especially if you are the main earner
How did you decide to save 3k? We currently have a 10k emergency fund and I'm very tempted to use some of it to overpay the mortgage - too much time spent playing with the OP calculator :rotfl: