Mortgage overpayments - To remortage first?

powerful_Roguepowerful_Rogue Forumite
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In about 4 months after i've cleared my final credit card, I want to then make overpayments off my mortgage.

Current mortgage

- £63,000 outstanding
- £363 mortgage payment per month
- 18 years, 8 months remaining
- 3.74% Interest rate
- House value aprox £140,000
Been with the Halifax since 2005, was on a 5 year fixed which then went onto the SVR

I want to be paying off around £1000 a month, so can be clear in about 5 years time.

Would it be worth re-mortgaging first to a lower rate and all the hassle it entails, or continue with the Halifax and just throw the extra money at it?
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  • edited 29 July 2017 at 11:17AM
    bexster1975bexster1975 Forumite
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    edited 29 July 2017 at 11:17AM
    Hi

    You could re-mortgage with Halifax. It's no hassle and was always fee free when I did it. You could possibly half your interest rate if on SVR.

    If you are concerned about overpayment limits ( normally 10% of outstanding balance/year) why not reduce the term to, say, 10 years so your repayment is more, as long as you can pay this every month for the term.

    Good luck


    ETA: 2.04% lowest 2 year fix, no fee.
    Bexster :)
  • A_Frayed_KnotA_Frayed_Knot Forumite
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    There is much better rates out there, but you have to balance it off against the fees, unless you are lucky enough to get a re-mortgage without any fees.

    If can always afford £1000 a month, then I would go for that, then you always have the luxury of (normally a 10% overpayment allowed) if you find you have some extra £££'s.

    I went from 4.04% to 3.99% and thought that was all right. How wrong was I, I did eventually get 1.79% doesn't seem much difference, does it? Wrong ! ! ! - it halved my interest that was added every month.

    So you know my answer. DO IT ! ! ! as soon as you can.
    Always have 00.00 at the end of your mortgage and one day it will all be 0's :dance:
    MF[STRIKE] March 2030[/STRIKE] Yes that does say 2030 :eek: Mortgage Free 21.12.18 _party_
    Now a Part Timer from 27.10.19
  • A_Frayed_KnotA_Frayed_Knot Forumite
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    Great minds - Bexster - beat me to it :rotfl:
    Always have 00.00 at the end of your mortgage and one day it will all be 0's :dance:
    MF[STRIKE] March 2030[/STRIKE] Yes that does say 2030 :eek: Mortgage Free 21.12.18 _party_
    Now a Part Timer from 27.10.19
  • powerful_Roguepowerful_Rogue Forumite
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    Some great advice, thank you!

    I specifically like the idea of reducing the term of the mortgage and then making overpayments to the limit on top.

    I've had a look at the Halifax and seen this deal:-

    2 year fixed
    10 year term
    £656.88 per month
    2.04% until 31/10/19

    If I went for that, is there any easy way of working out how much I could overpay each month without incurring fees? Believe with the Halfax its up to 10% of the amount owed at the 1st January.

    Is there also an easy of working out how much extra I will save by dropping to the lower rate of 2.04% compared to the 3.74% im currently paying?
  • bexster1975bexster1975 Forumite
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    Hello

    Yes, I saw that too. I think £1000 in interest per year ( not including interest charged on interest, iyswim). If balance begins at £63000 I assume you could overpay £6300 this year. Don't know that for certain however.

    Bexster :)
  • powerful_Roguepowerful_Rogue Forumite
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    Thanks Bexster,

    Just trying to get my head around the figures - think the below is right using the mse calculator!

    Current mortgage
    Year 0 - 63,000
    Year 1 - 60,498
    Year 2 - 57,901

    So in the 2 years, £5099 would have been paid off.

    Potential mortgage
    Year 0 - 63,000
    Year 1 - 60,073
    Year 2 - 57,086

    So over the 2 years on the 2.04% rate, £5914 would have been paid off.

    I didn't know whether I had to keep the mortgage term at 18 years for both, to get a like for like comparion, or drop it down to the 10 years for the potential new mortgage. If I drop it to 10 years, it shows

    Year 0 - 63,000
    Year 1 - 57,262
    Year 2 - 51,406

    Which would be £11,595 paid off. Not sure which of my calculations is correct!

    Suppose the other benefit is that I could enjoy the lower interest rate for 2 years, whilst placing all my overpayments into a another account, and make a huge lump sum payment at the end f the 2 years - Then rinse and repeat.
  • bexster1975bexster1975 Forumite
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    Hi

    I'm afraid my mortgage maths us not great, so I will leave it to someone more skilled to tell you which is correct.

    I am a big fan if offsetting ( so saving what you don't pay off the mortgage). Sometimes you will get a better rate of interest on savings than your mortgage rate too. But it allows some flexibility in case your circumstances change. If course you could pay off a lump sum after the fix and then get another two year fix. I did much the same with my mortgage with the Halifax. 11 years total and paid off at 41.

    Good luck, you can do it

    Bexster :)
  • A_Frayed_KnotA_Frayed_Knot Forumite
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    Sorry, In your 1st post I thought that was what you meant, when you said you would like to pay £1000 a month, clearing in 5 years, that you would be reducing your term to 5 years, as that almost works out.

    If you went for the [email protected] deal, just remember that you will be saving on your interest as Bexster says, which in turn means you could put that towards your monthly mortgage payments as well.

    Another point to mention, is (you need to check, but if 10% o/p allowance allowed) then you will be allowed 10% up to 31.12.of that year, then the 10% allowance starts again from 1.1 of that year till 31.12. of same year.
    Always have 00.00 at the end of your mortgage and one day it will all be 0's :dance:
    MF[STRIKE] March 2030[/STRIKE] Yes that does say 2030 :eek: Mortgage Free 21.12.18 _party_
    Now a Part Timer from 27.10.19
  • powerful_Roguepowerful_Rogue Forumite
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    Hi

    I'm afraid my mortgage maths us not great, so I will leave it to someone more skilled to tell you which is correct.

    I am a big fan if offsetting ( so saving what you don't pay off the mortgage). Sometimes you will get a better rate of interest on savings than your mortgage rate too. But it allows some flexibility in case your circumstances change. If course you could pay off a lump sum after the fix and then get another two year fix. I did much the same with my mortgage with the Halifax. 11 years total and paid off at 41.

    Good luck, you can do it

    Bexster :)

    Thank you so much for your help and advice, it's certainly opened up my eyes on a different way of doing it.

    I've got the figure of 5 years in my head in which I would like to be mortgage free, which will make me 39.
  • A_Frayed_KnotA_Frayed_Knot Forumite
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    Always have 00.00 at the end of your mortgage and one day it will all be 0's :dance:
    MF[STRIKE] March 2030[/STRIKE] Yes that does say 2030 :eek: Mortgage Free 21.12.18 _party_
    Now a Part Timer from 27.10.19
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