Would you recommend overpayment?

steve700

Hi,

Having recently become debt-free, I'm now looking at my next options.

In January, I can pay up to 10% of my mortgage off which would amount to £5,500. This will be in addition to the £499 overpayment that I am making the other eleven months of the year.

This would obviously bring down my repayments in the future but I do not have any savings to do this.

The alternative is to start racking up some savings in time for January 2009.

Would you save or overpay?

Thanks

Steve

setmefree2

Hi

What's your mortgage rate? Usually, people are better of putting £3k pa into a ISA. Then anything left can be put into overpaying your mortgage. Maybe you should think about an offset mortgage? Then you could have a savings pot and be paying off your mortgage.

Well Done on being debt free:T:T:T:T:T:T:T

steve700

My rate is 5.99% fixed for 5 years - recently taken out which is unfortunate with rates possibly coming down.

I currently have just over 6 years left on my mortgage (my Dad forced me to take an endowment when I was quite young - I wasn't amused at the time but dead chuffed now) and was trying to get it down as quickly as I can.

Having said that, I do not have ANY savings at all.

Thanks

Steve

molit

would say save the money initially - general advice is to keep 3 months worth of outgoings for emergencies (boilre failing, unexpected bill etc) in savings before you pay off mortgage

steve700

That does make sense to get some savings behind me.

January is the only monthe when I can pay up to 10% of mortgage so it's not reall an opportunity to be missed if possible.

Thanks

Steve

David_B_2

When is your interest calculated?

If it is daily then monthly overpaying is much better in my view but I'd still pay a yearly lump sum if I had it and as able to.

I'd agree to not putting all your eggs in one basket and getting some savings. What about at least slitting your monthly overpayment or using addtitional funds to fill a ISA as well?

Or what are your current plans if you needed to get hold of £3000 for a boiler or car breakdown?

All the best

steve700

Interest is calculated monthly as far as I recall.

Having cleared my debts, and assuming that my Standby/Callout doesn't get taken away, I will have about £1500 disposable income each month.

That is how I would cover any unexpected costs at the moment.

Thanks

setmefree2

Hi

Pop over to Martin's top cash ISA page - most of these seem to be giving over 6% at the mo. You could put £3k into one of these in this tax year and £3k in next. Would that be enough rainy day money for you? What about your pension situation - have you got that covered adequately?

steve700

Thanks for the advice:D

I am paying extra in to my pension at work but rather than taking 6k on a credit card to stooze and pay off the mortgage, I'll start putting some savings aside.

The NS&I 6.3% looks pretty good and I should get up to the maximum for that before April, and then take out another one after that.

If I carry on with my monthly overpayment of £499, that will still be just under 6k paid off in a year.

You can't do it all, can you...

Steve

setmefree2

No you can't do it all - but it's the chip chip chipping away at it that does it, I think. I always think of my net debt position - so my mortage less savings- that way I stay incentivized...:D

Kaz2904

The ns&i isa is now 6.05%- when the interest rate dropped so did the interest earned on the ISA. I'm gutted because I've only just opened mine and DH'S!
Be aware of this but it does still beat your mortgage rate.

It's making me think that perhaps an ISA offset mortgage would be good for us because then we could transfer in and out depending upon what the interest rate does. The trouble is they could be going up and down like a fiddlers elbow and I could always be one step behind!