Is it good to overpay when you're looking to move?

KoolPenguin

Hi

I've done a lot of research on overpaying a mortgage and have noticed that almost all the information is geared towards actually paying off the loan quicker, so as to become debt free. Securing better rates is also often cited as a reason.

However, does it make sense to overpay if you know you plan to move in the near future? Assuming you already have a good rate on your mortgage.

I would have thought it does, as you are saving, plus investing more in your home. The risk I suppose is that your house decreases in value? But most investments come with risk, and this seems like a low risk in the South East (not London)

Can anyone confirm this and explain why this is not recommended more commonly for people looking to move up the housing ladder?

Thanks!

[Deleted User]

Any drop in value of your home doesn't change the amount you owe. If your borrowing rate is higher than your investment rate, it makes sense to overpay.

trailingspouse

Once you've paid money in to your mortgage, you can't get it back - even if you need it. When you sell your house (assuming it sells for more than the mortgage amount), the mortgage gets paid back anyway, so I would hang on to the money that you would be using to overpay, and use it to fund the other expenses that come with moving house.

Thrugelmir

KoolPenguin wrote: »

I've done a lot of research on overpaying a mortgage and have noticed that almost all the information is geared towards actually paying off the loan quicker, so as to become debt free.

The less you owe the less interest you'll pay. Once the debt is cleared you'll have spare cash to utilise. Also means that the amount you need to earn reduces. Should you in later life find yourself struggling to find well paid employment.

rtho782

When I overpay my mortgage with Nationwide, I build up an "overpayment reserve" and can then take payment holidays if I need to for whatever reason. So I can get it back.

And this is a recent (May 2016 purchase) mortgage.

Schoolworker

I have been overpaying for over 10years and it helped us move 5yrs ago to a bigger house as the mortgage amount which was ported due to house price increase and overpayments. We also had other money to my she for the move. At the moment I continue to overpay to bring down our mortgage amount before we ask for more funding for a extension later this year and will need to increase our term time to make it reasonable for us at this time.

I will try to continue to overpay a small bit as I believe it does help and you pay less interest.