Overpaying by 10%

Moneygrabber89

I have a HSBC mortgage for £105,000 on a 2 year fixed rate at 2.75%. My mortgage is over 25 years so after the 2 year fix I will be moving to another company.

We are saving a lot of money each month (In excess of £400). I have rang up HSBS and they suggested overpaying 10% on my monthly mortgage. This would be free of charge to do.

Can anybody advise if this is worth doing as it would decrease the overall money paid on my mortgage due to interest rates and also decrease the time span in which I pay my mortgage.

chelseablue

If you can overpay 10% of the balance each year then this year you can overpay £10,500

So you can overpay £875 a month.

I can only speak for our situation but I would say its worth doing. Ours is currently £225,000 and we're overpaying in case the interest rates rise we want the balance down as low as we can, plus we want to move one day so the less we owe the more equity we have to put down on the next house

getmore4less

unless you can find another alternative that pays better(net) you will save money.

£105,000 2.75% 25y £485pm interest £40,231
£105,000 2.75% 25y £885pm interest £17,679

overpaying £400pm could save you over £22k

Moneygrabber89

Hi,





Thanks for your response.





I am a little confused. We currently pay around £500 a month. Surely overpaying by 10% would only be £50 a month (£600 a year).





Ideally I would pay back 20% extra each month but HSBC will not allow this as we are on a fixed rate.

chelseablue

getmore4less wrote: »

unless you can find another alternative that pays better(net) you will save money.

£105,000 2.75% 25y £485pm interest £40,231
£105,000 2.75% 25y £885pm interest £17,679

overpaying £400pm could save you over £22k

I'd love you to do the sums for my mortgage but would probably keel over at the results!

chelseablue

jonamoralee8989 wrote: »

Hi,





Thanks for your response.





I am a little confused. We currently pay around £500 a month. Surely overpaying by 10% would only be £50 a month (£600 a year).





Ideally I would pay back 20% extra each month but HSBC will not allow this as we are on a fixed rate.

You should be able to overpay 10% of the outstanding balance, not 10% of the monthly payment

Moneygrabber89

Ahh interesting. That wasn't explained correctly then!


I might look to overpay £250 a month.

getmore4less

jonamoralee8989 wrote: »

Hi,
Thanks for your response.

I am a little confused. We currently pay around £500 a month. Surely overpaying by 10% would only be £50 a month (£600 a year).

Ideally I would pay back 20% extra each month but HSBC will not allow this as we are on a fixed rate.

try reading your T&Cs or your lenders information about overpayments and ERC.

https://www.hsbc.co.uk/1/2/mortgages/mortgage-fees

read the "Early Repayment Charge" section

getmore4less

chelseablue wrote: »

I'd love you to do the sums for my mortgage but would probably keel over at the results!

I have worked on numbers with mortgages bigger than yours AND £150k+ unsecured debts along side

chelseablue

getmore4less wrote: »

I have worked on numbers with mortgages bigger than yours AND £150k+ unsecured debts along side

Our current mortgage is £225,078

Rate is 1.49%

33 years to go :eek:

But aim is to clear it by the time I'm 50, which is in 17 years time

getmore4less

chelseablue wrote: »

Our current mortgage is £225,078

Rate is 1.49%

33 years to go :eek:

But aim is to clear it by the time I'm 50, which is in 17 years time

min £1250pm, £1300pm would be a good target to give a bit of breathing room(0.5% rise), more if pessimistic on rates.

Based on where you were a year ago at the start £231k you are a bit behind schedule(£220k), so have some catching up to do.


(Sorry for the hijack OP)