Overpayments

Toffee5959

Good Afternoon

I’m aware of the ERC but is there any issues with overpaying my mortgage a few pounds at a time.

I tend to set a daily budget for spending and any leftover on that day, I sweep across to my mortgage. I’ve maximised my saving accounts with higher interest rates

BarelySentientAI

No, none that I can think of.

Mark_d

My current understanding is that the ERC applies if you repay the entire mortgage.  You're often allowed to make a certain amount of overpayment each year with no penalty.  But why would you want to make overpayments?

Your mortgage will be automatically and certainly be repaid by the end of the term (assuming you have repayment mortgage).  So why not put any leftover money to better use - to enjoy life, or to do some long term investing?

la531983

Mark_d said:

My current understanding is that the ERC applies if you repay the entire mortgage.  You're often allowed to make a certain amount of overpayment each year with no penalty.  But why would you want to make overpayments?

You know this is a money saving website?

Paying more equals paying less interest. And likely finishing the mortgage earlier.

BarelySentientAI

Mark_d said:

My current understanding is that the ERC applies if you repay the entire mortgage.  You're often allowed to make a certain amount of overpayment each year with no penalty. 

Yes, and above that you pay the ERC.

Mark_d said:

So why not put any leftover money to better use - to enjoy life, or to do some long term investing?

Did you miss the "I’ve maximised my saving accounts with higher interest rates" in the first post?  Anyway, overpayments would also effectively be a form of long term investing, and who's to say that the OP doesn't already enjoy their life?

Newbie_John

I think @Mark_d shares very interesting side.
If you can match the rate of your mortgage - then it's really free money that can be used for any larger purchase you ever need. No need to finance car, take student loans, emergency purchase, safety buffer etc.

There are other products worth considering first like pensions, maybe even premium bonds for little risk. If you have a partner then you can also max out their limits.

The only issue I find with daily overpayments is that it makes tricky to understand your overpayment limits - as they'll be changing daily.

BarelySentientAI

Newbie_John said:

The only issue I find with daily overpayments is that it makes tricky to understand your overpayment limits - as they'll be changing daily.

Not for any of the lenders that calculate the allowance once at the start of the calendar year or mortgage term.

Newbie_John

BarelySentientAI said:

Newbie_John said:

The only issue I find with daily overpayments is that it makes tricky to understand your overpayment limits - as they'll be changing daily.

Not for any of the lenders that calculate the allowance once at the start of the calendar year or mortgage term.

And for yourself, if your limit is £10k a year, one day you pay £50, then £200, then £3.. at some point through the year you will need to stop to avoid ERC, so you'll have to calculate how much you have overpaid so far.
And then what do you do when you reached the limit? Save?

Hoenir

Sweeping excess cash into the mortgage longer term can only be beneficial. A good disclipline to adopt. As the money cannot be simply frittered away. 

BikingBud

If I don't need to generate cash to pay off the mortgage I can stop working and that has to be the best return on any investment going.

I stop giving my time to the taxman!

BarelySentientAI

Newbie_John said:

BarelySentientAI said:

Newbie_John said:

The only issue I find with daily overpayments is that it makes tricky to understand your overpayment limits - as they'll be changing daily.

Not for any of the lenders that calculate the allowance once at the start of the calendar year or mortgage term.

And for yourself, if your limit is £10k a year, one day you pay £50, then £200, then £3.. at some point through the year you will need to stop to avoid ERC, so you'll have to calculate how much you have overpaid so far.
And then what do you do when you reached the limit? Save?

If you've got 10k in tilly tidys, then you're probably capable adding up.