Overpayment advice

edited 17 August 2016 at 7:26PM in Mortgage-Free Wannabe
1 reply 437 views
MakkusuMakkusu Forumite
100 Posts
edited 17 August 2016 at 7:26PM in Mortgage-Free Wannabe
Hi, we're 4 months into our first mortgage, we've gone HTB route with a £44k equity loan.

Our mortgage is £163,400 @ 2.59% (fixed 5 year) and we're considering overpaying but it seems really borderline with whether to save the cash or overpay where possible.

We're considering overpaying between £500-£750 a month, am I right in thinking that come the 5 years interest free period ending we can simply remortgage with the equity in the property (Around £50-70k) to pay off/buy-out the government loan?

On the contrary we save £750 a month into savings accounts around 3% with hope in 5 years time we have around £45k to pay the government loan.

Having the cash is more attractive but I find it hard to get my head around the mortgage benefits, does paying off capital early on mean that a larger portion of our standard monthly mortgage payments go towards capital and less towards interest. Meaning there's some form of compounding effect?

Also the possibility of a child in the next 5 years *gulp* - not sure if overpayments are wise with this in mind??

Replies

  • obayobay Forumite
    570 Posts
    don't get me going but you'd earn 0.41% extra over the year with the savings account as paying the mortgage..

    I'd consider putting the money into the savings account and lump it each year as the first 5 years you'll have whopping fees to pay 5% in the first year as I recall...

    though, all the bricks matter i suppose!!!
    [STRIKE]1/12/16 - £152,599.00 [/STRIKE]
    [STRIKE]11/11/17 - £145,990.00 [/STRIKE] <> Overpaid £3916.
    11/11/18 - £142,074.00
    Barclays Car (5.99%)£0/£8,832.37
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