Mortgage advice

Nick1967

Hi everyone,
I need some advice please. I have a £41000 mortgage on a svr with 9 years and 5 months remaining. I have contacted my lender and they have offered a 3 year fixed rate of 1.99.
If I went for this my current monthly repayments would change from £456/ month to ££400.
I could comfortably overpay by £100? / month. Meaning I would pay £500/ month.
This would apparently reduce my term remaining to 7 years 5 months.
Does this sound ok or are there better ways of paying off my mortgage early?
Any advice would be most welcome as I really don't understand these things!
Thanks Nick1967

A_Frayed_Knot

Hi Nick
Your offer sounds OK to me with the info you have given, however if we had more info,
could advise more.

What is your SVR? and Is there a fee attached to your new deal?

Would you be able to pay £500 a month for these 3 years no bother at all, or is it a maybe?
could you afford even more?

For me, there was no better way in paying off my mortgage than overpaying,
others have other ideas on that - each to their own.

Done a quick calculation on yours - guessing your SVR is 4.9%

That means you would be MF in July 2028, and are paying £163.29 interest next month
based on £41,000 paying £456/month.

New deal offered -
Means you would be MF in August 2026 and paying £66.24 interest next month
based on £41,000 paying £500/month.

That would mean a saving of £97.05 in interest, to me - no brainer.

Give yourself a goal, it works wonders.

Nick1967

HI A Frayed Knot,
Thanks for replying. I can confirm the SVR I'm on at the moment is 4.99%.
I spoke to my lender (Santander) this week and they offered me a 3 or 5 year fixed rate deal.
The 3 year one was 1.99% with no upfront fee and the 5 year was 1.99% with a £1000 fee or 2.1% with no fee. I prefer the idea of 3 years . This was without setting up a new standing order for overpaying as they wanted a fee for that. I would prefer the option of overpaying as and when.
I don't want to remortgage with anyone else if possible as I don't want the hassle.
My main concern is paying off my mortgage early. We could easily afford £500/ month ,more some months. I just wondered if this sounds like a good way forward?
Thanks Nick

A_Frayed_Knot

[FONT=&quot]"The 3 year one was 1.99% with no upfront fee and the 5 year was 1.99% with a £1000 fee or 2.1% with no fee. I prefer the idea of 3 years . This was without setting up a new standing order for overpaying as they wanted a fee for that"[/FONT][FONT=&quot]
[/FONT]
[FONT=&quot]That's a new one on me - a charge to set up a sanding order, I would just set it up out of another account then, (not Santander).[/FONT]
[FONT=&quot]
[/FONT][FONT=&quot]I'm with you on not changing mortgage suppliers unless a really good deal, and there are better deals out there but are they worth the hassle?[/FONT]
[FONT=&quot]
[/FONT][FONT=&quot]Are you allowed overpayments with no penalty? it is usually 10% of your mortgage at the start of the mortgage.[/FONT]
[FONT=&quot]I switched to a new mortgage in the month of Oct/Nov so was allowed 10% o/p from Jan to Oct, then another 10% from Oct/Nov to end of Dec - so had savings, so decided to o/p my savings (not all) into mortgage, then instead of o/p mortgage put back into my savings.[/FONT]
[FONT=&quot]
[/FONT][FONT=&quot]I tried to o/p as much as possible before 31st Dec each year, as if you don't use it, you lose it, that's where savings came in - then repaid back my savings instead of mortgage over next few months and gained by not paying as much interest. Some would have their savings at a better rate than mortgage, but not me.[/FONT]
[FONT=&quot]
[/FONT][FONT=&quot]The key is - Balance, and just saying what I did and it worked for me.[/FONT]

A_Frayed_Knot

Just to add, this is my one big mistake I made, and still beat myself up about it.

New to the o/p game, I didn't think anything of it when my interest rate went to SVR as
it was lower :eek: than my interest rate, so ended up lower than I was paying a month which led me to false security.


Didn't seem a lot going from 4.04% to 3.89% but by that time new deals were appearing so could get a deal for 1.89%
which in actual fact - halved my interest charge.

Nick1967

Many thanks,
They did say a max of 10% over payment was allowed.
Another option I have is to pay £5000 from savings before agreeing to 3 year fixed rate. That would reduce outstanding mortgage to £36000 ,then go onto 3 year fixed rate plus over pay £100/ month
I guess that would reduce the remaining term?

Nick1967

Also I don't really completely understand over paying (I'm a self employed painter and decorator!)
I'm assuming when you over pay it automatically reduces the remaining term. In my case aprox 2 years.
So my remaining term would be roughly 7.5 years ?
I have read somewhere about the interest each month reducing instead and the term staying the same?
I'm confused !

A_Frayed_Knot

Nick1967 wrote: »

Many thanks,
They did say a max of 10% over payment was allowed.
Another option I have is to pay £5000 from savings before agreeing to 3 year fixed rate. That would reduce outstanding mortgage to £36000 ,then go onto 3 year fixed rate plus over pay £100/ month
I guess that would reduce the remaining term?

Being on SVR you would be allowed to overpay any amount and not be penalised for it as you are on SVR.

10% is about the norm, once you are in your new deal, anything over and is penalty time, so you just need to save until the beginning of the next year then o/p immediately (so long as its within your 10%)

Paying a lump from your savings is OK depending on what have in savings, and what you feel comfortable being left with in savings, do not leave yourself short, I and everyone advises an emergency fund of around 6 months expenses justin case.

Anything you overpay brings your MF date closer, unless the bank reduce your payment to stretch out your term.

By o/p a large lump sum you may then have the option of either
a) o/p lump sum - reduce term and pay same monthly amount
b) o/p lump sum - keep term same which would reduce your monthly payment - Banks favour this one :mad: the wee blighters :mad:

Personally, when I was on SVR and went for new deal, I worked out how much I could afford monthly, then pushed myself a little further £30 then worked out how many years I renewed my mortgage for. Please let me know if this is confusing to you - I will try and explain better.

Then I still had my overpayment 10% option

A_Frayed_Knot

Nick1967 wrote: »

Also I don't really completely understand over paying (I'm a self employed painter and decorator!)
I'm assuming when you over pay it automatically reduces the remaining term. In my case aprox 2 years.
So my remaining term would be roughly 7.5 years ?
I have read somewhere about the interest each month reducing instead and the term staying the same?
I'm confused !

Do you mean the o/p lump sum or the monthly o/p?

Lump sum before new deal would mean the choices I explained above.

The remaining term all depends on what you pay a month, the more you pay, the less interest gets added, which in turn means you are Mortgage Free sooner.

Have a play with this calculator (it says debt - just treat that as your mortgage owed) and fill in the blanks.

http://www.whatsthecost.com/snowball.aspx

£36,000 paying £500 monthly means you would be finished your mortgage in 6 years 4 months
August 2025 - with no overpayments at all.

o/p by £50 a month and you would finish January 2025 :j
o/p by £100 a month and you would finish July 2024 :j:j

Now if that doesn't inspire you to o/p at least something, then . . .

and it doesn't have to be an exact amount, every month, just go as you please . . .

As I said before just check and double check all details before delving in, but please do not do what I done and left it for 18 months before entering a new deal.:(