Want to be Mortgage free

GeordisStu

Mortgage has 10 year 11months to run.  Just fixed for 5 years at 3.99%

Plan is to over pay and be mortgage clear in 5 years.  Mortgage is £760.00 / month over payment of £650.00.  I’m only allowed to make overpayments of 10% each year, does this mean my overpayments will need to be reduced accordingly as the mortgage capital reduces?

TheSpectator

GeordisStu said:

Mortgage has 10 year 11months to run.  Just fixed for 5 years at 3.99%

Plan is to over pay and be mortgage clear in 5 years.  Mortgage is £760.00 / month over payment of £650.00.  I’m only allowed to make overpayments of 10% each year, does this mean my overpayments will need to be reduced accordingly as the mortgage capital reduces?

Depends on the lender. Pretty sure Halifax base the 10% on the balance on 1st January balance each year.

At 3.99% you would be better investing your overpayments in savings accounts, 5% rates widely available.

penners324

GeordisStu said:

Mortgage has 10 year 11months to run.  Just fixed for 5 years at 3.99%

Plan is to over pay and be mortgage clear in 5 years.  Mortgage is £760.00 / month over payment of £650.00.  I’m only allowed to make overpayments of 10% each year, does this mean my overpayments will need to be reduced accordingly as the mortgage capital reduces?

Yes. So put the remainder into a savings account. 
I've gone for Coventry BS triple access saver.

penners324

TheSpectator said:

GeordisStu said:

Mortgage has 10 year 11months to run.  Just fixed for 5 years at 3.99%

Plan is to over pay and be mortgage clear in 5 years.  Mortgage is £760.00 / month over payment of £650.00.  I’m only allowed to make overpayments of 10% each year, does this mean my overpayments will need to be reduced accordingly as the mortgage capital reduces?

Depends on the lender. Pretty sure Halifax base the 10% on the balance on 1st January balance each year.

At 3.99% you would be better investing your overpayments in savings accounts, 5% rates widely available.

Which is fine while savings rates are above that figure. When they drop below it can cause all those savings built up being in the wrong place.

amnblog

With most Lenders yes, 10% of the remaining balance. An exception would be a Lender like Nationwide who base the 10% limit on the original balance.

Bigphil1474

OP, the 10% overpay limit only applies whilst you are within the fix deal - so basically for the next 5 years. If you can get a savings account which pays more than the 3.99% then you should put the overpayment in there. However, that's still a small gamble as if the interest drops you can't get the 10% overpayment period you haven't used back. If you can afford to lock that money in, you might have a better chance of getting a higher interest over the next 5 years. 

The easiest solution is to overpay monthly as it involves less messing around, but yes, if your fix says it's 10% of the outstanding balance, then you would have to calculate what you can overpay each year which will get lower. Put the rest into savings , and pay off the full balance at the end of the 5 year deal.