Mortgage-free...where to start? 28 June 2021 at 9:32AM in Mortgage-free wannabe 5 replies 211 views

Peppermint90

Hello all, 

I recently purchased a mortgaged home, and cannot wait to be mortgage free already! 
But, I don't know where to start...or whether making overpayments is the right financial decision for me at this present time....

I have a few buy-now-pay-later bills to pay off by next year- totals around £3k. Should I pay that off sooner and then start mortgage overpayments or is it wiser to start overpayments now and pay off the other stuff in smaller installments over the rest of the year? 

Also, if i make overpayments, does it mean my i'll be paying less interest overall too? 

Also, I'm with Halifax, how can I find out how much maximum i can overpay in a year? I can afford to make £200 overpayments each month...

Sorry for so many questions, but thank you in advance! 

tacpot12

My advice would be to make sure you can pay your Buy-Now-Pay-Later bills first before making any overpayments on your mortgage. Being mortgage free is just one aspect of financial freedom. Your should also make sure you have an emergency fund to cover the cost repairs that might need doing in the house, such as replacing the boiler. 

You will have many years to make overpayments, so should not be in too much of a rush at the moment.

You can give Halifax a call to check what overpayments you can make.     

prestonmike

Peppermint90 said:

Also, I'm with Halifax, how can I find out how much maximum i can overpay in a year? I can afford to make £200 overpayments each month...

If you log into online banking, there'll be an overpayments section under your mortgage, this will show you how much you can pay penalty free (this will be 10% of the balance on 1st January), although you can pay more than that but then you'll have an overpayment charge, which depending on your mortgage, may be more or less than the interest rate, you'd have to check your documents to see what your overpayment charge will be

Peppermint90

Thank you for your advice guys! 

bubblycrazy

Peppermint90 said:

Also, if i make overpayments, does it mean my i'll be paying less interest overall too? 

Yes it does. 
If you put your figures into this calculator you'll be able to see how much interest you'll save. https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

mark55man

Generally at low interest rates there is something to be said for building up savings (eg an EF as mentioned) and investments - eg Stocks and Shares ISA or pensions.  Eg if the £200 was invested in your pension, you would get the tax rebated, and may get additional employer contribution.  In any case over the 25 years or so your mortgage is currently set up for many many many times more often than not, you would end up with more net wealth than if you overpaid your mortgage.

I am aware that there is nothing quite like owning your own home but it is not the only aspect.  A common approach is to do both - half and half : Half goes to OP and reducing term and interest, half goes to investments to help build your wealth in the long term.  This view will be the minority view on this forum, but some people are going the other way and reducing repayments to be able to afford more investments.  The important thing is to do what you feel comfortable with, and not spend it on trivia