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Overpaying mortgage?

edited 30 November -1 at 1:00AM in Mortgages & Endowments
6 replies 775 views
MollyFTRMollyFTR Forumite
3 posts
edited 30 November -1 at 1:00AM in Mortgages & Endowments
We took a mortgage out in February 2019 for £160,999, it is a 35 year length with 2.49% fixed for 5 years, we currently pay £574.70 a month.

My son is due to get his free 30 hours in nursery so I am thinking about overpaying on the mortgage as will have a lot less money being spent on childcare. I am also going to be earning more money as will finish uni that time too.

On the mortgage documents I can see it says a capital reduction of 10% per annum can be made without incurring an early repayment charge. So does this mean I can only pay an extra £57.47 a month and is this worthwhile doing?

Just looking for some advice so we are spending the money wisely.
Thanks in advance

Replies

  • Nebulous2Nebulous2 Forumite
    2.9K posts
    Sixth Anniversary 1,000 Posts Name Dropper
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    The capital is the £160,000. This means you can repay £16,000 in a year without penalty. If you're going to get anywhere close to that you need to check with your lender how it's calculated. Years vary from lender to lender, some being from mortgage date and some being Jan to Dec, as does the calculation on the capital sum.
  • MollyFTRMollyFTR Forumite
    3 posts
    Thank you that’s very helpful and makes sense now
  • dimbo61dimbo61 Forumite
    10.8K posts
    Part of the Furniture 10,000 Posts Photogenic
    ✭✭✭✭✭
    Have you got a Good emergency pot ?
    Money for a new car, boiler, washing machine ?
    Once you have say 6/9 months of income in savings then overpay every month
  • getmore4lessgetmore4less Forumite
    39.1K posts
    Part of the Furniture 10,000 Posts I've helped Parliament
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    Emergency pots should be based on spending not income.
  • MollyFTRMollyFTR Forumite
    3 posts
    We both have separate saving accounts for rainy days, and have already started the uni fund for our little one. Also have no debts which is why we are thinking of overpaying on the mortgage.
  • getmore4lessgetmore4less Forumite
    39.1K posts
    Part of the Furniture 10,000 Posts I've helped Parliament
    ✭✭✭✭✭
    With a rate of 2.5% there will be some places you can put it and get a bit more than that.

    Pensions are another option.

    The mortgage is an easy option and flexible, look what a larger payment can do.
    current
    Borrow rate payment term interest
    £161k 2.49% £575.70 35y 0m £80,376

    overpayments
    Borrow rate payment term interest
    £161k 2.49% £575 35y 0m £80,303
    £161k 2.49% £580 34y 6m £79,076
    £161k 2.49% £590 33y 7m £76,736
    £161k 2.49% £600 32y 9m £74,536
    £161k 2.49% £650 29y 1m £65,237
    ...
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