Looking for a Savings MOT

NewShadow

Thank you both

Alexland wrote: »

Why not take out a 30 year term with overpay option? If you chose to make the same payments as you would have under the 25 year deal then you would pay the same interest (as it is calulated each period on the balance) but have lower monthly commitment if you hit upon hard times? If you used your overpayments to reduce future payments (rather than shorten the term) then it puts you in a very strong position reducing the size of your required emergency fund.

This definitely sounds good - I've only seen mortgages that allow 5% overpayment without penalty or fees, and I 'thought' that meant I could overpay from 25 years down to 20, but not 30 years down to 20?

The main thrust is to have the mortgage paid off at 55 so I then have the choice of retiring/part time/ keeping working.

As it stands, at current rates - according to the MSE best buy comparisons - the repayments would be in the region of £400-£500 per month - which is between £200-£300 less than I'm comfortably able to afford at my current salary and maintaining my current lifestyle/savings level.

If you need that money for the property purchase in 2 years that's a proper gamble.

I know it's completely against the advice given but I don't 'need' it in two years and won't really hurt if it's tied up for a while. I'm not going to panic and crystallise losses on a down cycle because my birthday is looming... honest. Worst that happens is that I keep adding to it and have £500k for retirement to buy a property outright

I haven't checked your maths but you don't seem to be assuming any growth above inflation and fees? For money that can be tied up long term 15 years+ most people should take a sufficiently adventurous asset allocation to generate a real return.

I do expect the numbers will go up, and I am hopeful that they'll go up at a rate above inflation - but I only have a small brain so trying to forecast future market growth vs future cost of living increases... I'm just trying to make sure I'm putting away a sensible minimum and then can be pleasantly surprised

Alexland

NewShadow wrote: »

I've only seen mortgages that allow 5% overpayment without penalty or fees

We just entered into a new 5 year fixed rate deal with Santander and their policy is still up to 10% of the mortgage loan balance each calendar year. As such it's possible to make monthly payments significantly higher than required if desired. Plus we get cashback on mortgage payments via the 123 lite account.

I have always used the below handy calculator (with full schedule option ticked) to understand how my payments would clear the balance. Try playing with it but ignore that it's in dollars the maths is the same:

http://bretwhissel.net/amortization/amortize.html

NewShadow wrote: »

The main thrust is to have the mortgage paid off at 55 so I then have the choice of retiring/part time/ keeping working.

Or just have more than enough to cover the balance in savings and investments growing at a higher rate profiting from the difference. I regret paying off too much of our mortgage early as it would have been more efficient to put even more in our pensions and S&S ISAs. It's only worth overpaying enough to be comfortable with the liability and get the best rate.

NewShadow wrote: »

I do expect the numbers will go up, and I am hopeful that they'll go up at a rate above inflation - but I only have a small brain so trying to forecast future market growth vs future cost of living increases...

Just focus on return above inflation and fees (real return) then all the numbers will be relative to spending power. For example if inflation averages 2%, fees average 0.5% and investment return average is 5% then your return above fees and inflation is 2.5% compounding each year.

Alex

Zero_Sum

NewShadow wrote: »

Thank you both



This definitely sounds good - I've only seen mortgages that allow 5% overpayment without penalty or fees, and I 'thought' that meant I could overpay from 25 years down to 20, but not 30 years down to 20?

The main thrust is to have the mortgage paid off at 55 so I then have the choice of retiring/part time/ keeping working.

As it stands, at current rates - according to the MSE best buy comparisons - the repayments would be in the region of £400-£500 per month - which is between £200-£300 less than I'm comfortably able to afford at my current salary and maintaining my current lifestyle/savings level.


I know it's completely against the advice given but I don't 'need' it in two years and won't really hurt if it's tied up for a while. I'm not going to panic and crystallise losses on a down cycle because my birthday is looming... honest. Worst that happens is that I keep adding to it and have £500k for retirement to buy a property outright



I do expect the numbers will go up, and I am hopeful that they'll go up at a rate above inflation - but I only have a small brain so trying to forecast future market growth vs future cost of living increases... I'm just trying to make sure I'm putting away a sensible minimum and then can be pleasantly surprised

I remortgaged last year with Nationwide & im allowed 10% overpayments.

What you could do is instead of overpaying, play with regular savers which should give a better rate than mortgage. Then use the balance of these to overpay when you go to remortgage (that is if you opt for a 2 year deal which if planning to overpay could be a better option as it puts you onto a better LTV earlier on & therefore better rate)