Overpaying by 10%

Moneygrabber89

I am still unsure about whether it is worth it? Would it be better saving using a savings account or better overpaying mortgage?

Also would this affect the possibility to of mortgaging in later years?


On a side note my mortgage 2 year fixed runs out October. Should I start looking for a new mortgage now as how long does this take? When applying for new mortgage do I just enter the remaining balance on my mortgage? In theory should my mortgage reduce every year?

chelseablue

getmore4less wrote: »

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)

Thank you, thoroughly depressed now :rotfl:

We didn't overpay much last year at all, we mainly spent money redecorating and buying bits for the house.

This year we aim to OP £500 a month on top of the £720 standard payment.

When our son is in full time school we should be able to OP more to make up for the first year of nothing

Moneygrabber89

Also HSBC gave me 3 options:

• I can increase my direct debit by Z amount each month to overpay
• I can pay a certain amount each year as a 1 of payment to overpay
• I can alter how much I overpay each month and alter it month by month depending how much I want to overpay

Is any of these methods better than the other or have any other impacts?

NinaSwiss

I would leave the contractual payments to carry on as it is.
Then seperately setup a standing order to pay £250(or whatever amount) a month into your mortgage account.
This way you have control(eg to increase , decrease or stop it) over the overpayment without messing with the contractual payments.

However do check that overpayments will reduce the balance rather than recaculate your monthly/contractual payment.

AnotherJoe

jonamoralee8989 wrote: »

I am still unsure about whether it is worth it? Would it be better saving using a savings account or better overpaying mortgage?

Thats two choices, a third is pension. You might well be better off putting some or all of that money towards a pension. Depends what your current pension arrangements are of course, but in general people here (IMNSHO) tend to overfixate on paying off their mortgage above all else.

Think of a pension as another debt, like a mortgage,except simply you are paying it in reverse. It starts off small, and you want it to be large. At certain times of life one or the other is a better choice. So you have a trade off. What that is depends on age, earnings, taxpayer status, mortgage rate, ambitions to retire early, current pension rate.

Moneygrabber89

You have all been a great help.

I think overall it would be better to overpay rather than put into a savings. I will ring HSBC on lunch to discuss this and confirm this will actually reduce the balance.

My 1 outstanding question is by doing this would it affect the possibility of remortgaging house later in life?

dimbo61

No it will not effect getting another Mortgage with the same lender or a different lender.
It improves your LTV and you are reducing your debts win/win.
If you build up a huge overpayment reserve you might even be able to have a mortgage holiday if needed.
There are a few regular savers/current accounts paying 5% Nationwide flex being one

Moneygrabber89

I currently pay into a government pension scheme where I contribute 3.8% of my monthly salary and the employer contributes 12.1%.

This is a very good pension. However each month we still have a lot of savings. I have them currently in a Lloyds saving account but the rate is terrible.

HSBC suggested I pay an extra 150 a month but they couldn’t tell me how much earlier I will get the mortgage paid off.

AnotherJoe

jonamoralee8989 wrote: »

HSBC suggested I pay an extra 150 a month but they couldn’t tell me how much earlier I will get the mortgage paid off.

About 7 years.
(based on the fact that an 18 year mortgage for £105k would be a repayment of £617/month)

NinaSwiss

You could try using this to esitimate how much overpaying could save you:
http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator