Aiming to be mortgage free when I'm 40.

Exodi

Sncjw said:

Different things works for different people. 

Generally applies to 'the husband liked to make his lunch for work in the morning, whereas his wife preferred to do it the night before'... not so relevant on objective measures like 'I prefer saving interest at 2.44%, whereas you prefer saving interest at 5-7%, everyone's different'.

Sncjw said:

Why so rude when you say no.surprise there when I mention my husband..I did talk it through with him but he wanted to just over pay the mortgage directly. 

I don't think what I said was so rude? I said it's not suprising you say your husband disagreed. You mentioned your husband left you to do things yourself on the first page (see below), and based on your very quick dismissing of any ideas contrary to what you're currently doing, your husband happening to disagree on an idea you also happen to disagree with, was obviously predictable:

"Showed my husband these figures and I explained it to him and he was like whatever 🤣..

He doesn't really understand alot of finances and espically to do with the house. He seemed perplexed when we went to the meeting to find out about mortgages so he has left me to do it. "

Sncjw said:

Also I've had a look and looks that there's only so much a month tgat you can move into savings account for the interest rate. I think it will be easier to remember to put it into the overpayment account rather than sending to multiple places. Yes we could do standing orders but we like the flexibility that overpayments have and also only need to send to one place.

Yes, in the first example I linked, I suggested taking advantage of the £300 limit at 7% for First Direct and the £250 limit at 5.25% for Lloyds (there are higher interest regular savers available, these were just examples).

And your comments like the one above are exactly what bothers me. Again, dismissed with a reason whipped up on the spot. You've even pointed out you could just as easily set up a standing order for these savings accounts and there be no difference outside the initial 5 minutes of admin.

To say that 'we like the flexibility that overpayments have' is frankly ridiculous. If you mean in the amount you send - you can just as easily send less money (or none) to regular savers, the £300/£250 limits above are just max monthly contributions. In fact the regular savers are more flexible because the money is still accessible (with caveats), whereas overpayments on a mortgage are generally inaccessible.

So yeah, if hundreds/thousands of pounds worth of lost interest is worth not having to deal with seeing two or three standing orders come out of your bank account instead of one, then you do you.

Sncjw

My husband is getting better with finances and I did sit down to explain to him but he wants to just send it to the mortgage..

I appreciate your advice on this but this is what we want to do. 
We can withdraw money from overpayments if we need to. 

Are you saying that we have to split the payments to savers as we over pay by 620 quid  and the first direct is 300 max a.month..

Exodi

Sncjw said:

We can withdraw money from overpayments if we need to. 

This is interesting, because your earlier point was that you wouldn't consider savings accounts because you don't want the temptation of being able to take the money out.

Sncjw said:

Are you saying that we have to split the payments to savers as we over pay by 620 quid  and the first direct is 300 max a.month..

Yeah you can only put up to £300 a month into First Direct, so if you wanted to put the £620 in regular savers, you'd have to use at least 2.

There's details of the regular savers, their maximum monthly deposits and whether there is penalties for withdrawing (which you may or may not want - penalties could be a good thing as it reduces the temptation to dip into them).

https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/

I think it's clear I'm not changing your mind though so I'll stop.

Bet you're glad you took a five year fix out in 2020 (I took a five year fix in 2019) - the current mortgage rates are quite depressing to look at, I am not looking forward to renewing in June 2024.

Hopefully it comes down by your renewal in 2025. My heart goes out to those that have had to renew over the past year, really has just been luck of the draw.

Sncjw

So people aren't allowed to change their mind? 

I was very busy yesterday visiting various relatives after coming back from holiday and trying to work this out in between. So I probably wasn't fully thinking about it
 

Sncjw

Also another question wouldn't delaying the overpayment change more interest as it's calculated daily. 

Exodi

Sncjw said:

Also another question wouldn't delaying the overpayment change more interest as it's calculated daily. 

I think you're overly focused on this 'interest calculated daily' thing, it's more of a technical aspect and not terribly important to any of this. Yes you'd obviously pay more interest on the mortgage if you make the over-payment later, but this is offset (and then some) on the interest you make on savings.

Sorry, maybe I should explain it with numbers to make it easier to understand - I've included a table at the bottom of my reply (hopefully formatting doesn't kill it).

Using your signature current balance (£63,787.16), the mortgage rate of 2.44% (calculated daily) and assuming 30 days in the month. The left Balance/Interest column is without the overpayment, the right Balance/Interest column is with the overpayment at the start.

As you can see, between the two examples over a month your balance reduces by £621.20, with £620 of that being from the overpayment. The reason overpayment calculators show such massive reductions over the life of the mortgage, is the interest you save on this £620 block doesn't just last for one month, but for the entirety of the mortgage.

But this is no different to a savings account, except instead of saving the interest, they give it to you. In practice this is the same thing because you can eventually use the money to overpay the mortgage.

The reality is that you would benefit over twice as much from payments made to savings products than overpayments, because the interest rate is over twice as high.

I think it is a difficult concept to understand at first (as said earlier, Martin Lewis regularly posts articles about this) but once you get your head round it, you realise it makes no sense to immediately overpay a mortgage that you have locked in a low rate of interest on, while there are high interest savings products floating about.

As you said earlier, everyone is different, but I think we're all similar in preferring money in our pockets than the banks, if it's within our control. Once the standing orders are set up, you literally would be saving over double the interest for no work. The only barrier (as has been discussed above) is your reluctance to even consider different ideas.

Day	Balance	Interest		Balance	Interest
1	£63,787.16			£63,167.16	-£620.00
2	£63,791.42	£4.26		£63,171.38	£4.22
3	£63,795.69	£4.26		£63,175.61	£4.22
4	£63,799.95	£4.26		£63,179.83	£4.22
5	£63,804.22	£4.26		£63,184.05	£4.22
6	£63,808.48	£4.27		£63,188.28	£4.22
7	£63,812.75	£4.27		£63,192.50	£4.22
8	£63,817.01	£4.27		£63,196.72	£4.22
9	£63,821.28	£4.27		£63,200.95	£4.22
10	£63,825.55	£4.27		£63,205.17	£4.22
11	£63,829.81	£4.27		£63,209.40	£4.23
12	£63,834.08	£4.27		£63,213.63	£4.23
13	£63,838.35	£4.27		£63,217.85	£4.23
14	£63,842.62	£4.27		£63,222.08	£4.23
15	£63,846.88	£4.27		£63,226.30	£4.23
16	£63,851.15	£4.27		£63,230.53	£4.23
17	£63,855.42	£4.27		£63,234.76	£4.23
18	£63,859.69	£4.27		£63,238.98	£4.23
19	£63,863.96	£4.27		£63,243.21	£4.23
20	£63,868.23	£4.27		£63,247.44	£4.23
21	£63,872.50	£4.27		£63,251.67	£4.23
22	£63,876.77	£4.27		£63,255.90	£4.23
23	£63,881.04	£4.27		£63,260.12	£4.23
24	£63,885.31	£4.27		£63,264.35	£4.23
25	£63,889.58	£4.27		£63,268.58	£4.23
26	£63,893.85	£4.27		£63,272.81	£4.23
27	£63,898.12	£4.27		£63,277.04	£4.23
28	£63,902.39	£4.27		£63,281.27	£4.23
29	£63,906.66	£4.27		£63,285.50	£4.23
30	£63,910.94	£4.27		£63,289.73	£4.23

Sncjw

So it is reducing by 4p in interest I pay per day in the long run but it's better to go to savings to gain more interest as I would benefit off in the long run. 

I'm looking at the savings accounts now..

I am looking to save 700 in savings which is a bit more than I over pay ATM due to the overpahment limits but no harm in savings more and a whole number. So would need multiple accounts I imagine..

Then when we have paid off our credit cards then we will save a further 400 a month but this would a be continued thing but would be nice if we could dip into it when we need the money for bathroom and kitchen remodelling. 

Obviously this is also down to what the rates will be like. 

Sorry for being a pain in the !!!!!! !!!!!!

Sncjw

I just seen the first direct is for existing account holders only which I am not. 

I am with Halifax which looks like a decent rate still..

Exodi

Sncjw said:

So it is reducing by 4p in interest I pay per day in the long run but it's better to go to savings to gain more interest as I would benefit off in the long run. 

I'm looking at the savings accounts now..

I am looking to save 700 in savings which is a bit more than I over pay ATM due to the overpahment limits but no harm in savings more and a whole number. So would need multiple accounts I imagine..

Then when we have paid off our credit cards then we will save a further 400 a month but this would a be continued thing but would be nice if we could dip into it when we need the money for bathroom and kitchen remodelling. 

Obviously this is also down to what the rates will be like. 

Sorry for being a pain in the !!!!!! !!!!!!

Yes, I linked the regular savers available above and you'd probably need more than one of them (but you can get quite a good interest rate, over 5%). Alternatively instant access accounts (which you can put in and take out as much money as you want) are paying about 3.5%.

You could do a combination of both, so some money is easily accessible and some isn't. There's no one size fixed all, depending on who you bank with, it might be easier to open an account with them (if they have a decent savings product available).

As you say, this whole decision is based on what rates are like. If you renew your mortgage in 2025 and the mortgage rate is much higher (higher than you can get from savings accounts at the time) then it would make more sense to overpay the mortgage.

You're fine, I know this stuff is difficult to get your head round. My colleague at work had been overpaying his mortgage, which he tells me is fixed at 1.69% and was mortified when he did the maths and realised how much he could have saved putting the money in a high interest savings accounts instead.

I'm not offended if you do decide to continue overpaying the mortgage (because you decide it's not worth the faff of opening new accounts or setting up standing orders) but I just wanted to be sure you made this decision knowing it's not the best financial option (which I think you do now).

Ultimately, we all gluttons to convenience. I have family members who have thousand of pounds in savings accounts paying 0.1% AER interest because they don't want to deal with the hassle of opening a new account. 

Your situation is very similar to mine (though my mortgage is about 4 times as much - the perks of living in Kent I guess!).

Exodi

Sncjw said:

I just seen the first direct is for existing account holders only which I am not. 

I am with Halifax which looks like a decent rate still..

Yeah you have to open a current account with them at the same time (annoyingly). You don't need to do anything with the current account though.

The Halifax RS is solid, for sure.