Overpay or save

gzoom

marneyr said:

gzoom said:

marneyr said:

We see ourselves staying here for quite some time (20+ years) so ROI not an immediate concern. 

If you see your self there for a long time it's probably worth thinking about doing the works sooner rather than later. Inflation might be lower but you can guarantee building costs in 2025/26 will be higher than now.

We delayed our build start date from 2020 to 2023 due to saving up so we really got hammered by Inflation. I think our build would have come in 15-20% cheaper had we got on with the build in 2020.

I agree with the sentiment of this. I always want to hurry things along. But, doing this will cancel/switch me onto a new larger mortgage with a much higher interest rate. I could go from 1.25 to a new 5% (i havent actually checked current rates available) mortgage no? 

No you don't need to touch your 1.25% rate, just take on 'additional borrowing' with the same lender. It's what we did, all can be done via the phone/internet, essentially a new mortgage application, but with far less concerns/checks from the lender because they already have all your details. 

The rate on the new borrowing will be higher than your old rate, but essentially you can than choose to pay off the higher rate first when funds allow. 

GetRichOrDieSaving

Im sorry to hijack this thread, but I have a similar style of question to ask and for the life of me cannot seem to work out how to start my
own thread!!! 

Anyway, my mortgage rate is currently 4.01% on a five year deal, three of which I have left. I pay off my annual 10% allowance each year. 

Obviously the current BOE rate makes it worth me keeping my savings elsewhere and paying off my 10% at the end of my year, rather than the beginning. But at what percentage would it be worth reversing that procedure? When saving accounts drop below 4.01%, is it that simple or are there other factors to consider that I’m missing? 

Thanks in advance and again sorry for the hijack.!

Archerychick

marneyr said:

Hi there, thabks both. 
The lending of the 140-180k would be additional and on top of my existing mortgage. Whether this would be a bolt on or a secondary separate mortgage would need to be confirmed. I could over pay whilst my mortgage interest is so low but as you say interest rated are 4.75% so saving makes more sense. Maybe its the insecure bit of me that takes great pleasure in seeing my fibal mortgage number getting chipped down each month rather than in an isa that numbers dont directly compare. 

I am the same! Set up a spreadsheet that has your mortgage balance, the amount you have saved for your mortgage and therefore the actual mortgage balance - this really works for me! My mortgage is costing me about £30 month right now but I’m saving about £80 in savings interest so it does make a difference to save rather than overpay when you’ve such a low rate.

Mine will be paid off when the current deal ends next year  

Archerychick

GetRichOrDieSaving said:

Im sorry to hijack this thread, but I have a similar style of question to ask and for the life of me cannot seem to work out how to start my
own thread!!! 

Anyway, my mortgage rate is currently 4.01% on a five year deal, three of which I have left. I pay off my annual 10% allowance each year. 

Obviously the current BOE rate makes it worth me keeping my savings elsewhere and paying off my 10% at the end of my year, rather than the beginning. But at what percentage would it be worth reversing that procedure? When saving accounts drop below 4.01%, is it that simple or are there other factors to consider that I’m missing? 

Thanks in advance and again sorry for the hijack.!

It depends if you’re paying tax on your savings interest or not. Assuming you’re not, it’s as simple as comparing the %. If you can get more than 4.01% in savings account without tax on the interest then do that. If not pay it off your mortgage. There are plenty of regular savers much higher than this so it shouldn’t be hard to put away money each month ear marked for your mortgage 

GetRichOrDieSaving

Archerychick said:

GetRichOrDieSaving said:

Im sorry to hijack this thread, but I have a similar style of question to ask and for the life of me cannot seem to work out how to start my
own thread!!! 

Anyway, my mortgage rate is currently 4.01% on a five year deal, three of which I have left. I pay off my annual 10% allowance each year. 

Obviously the current BOE rate makes it worth me keeping my savings elsewhere and paying off my 10% at the end of my year, rather than the beginning. But at what percentage would it be worth reversing that procedure? When saving accounts drop below 4.01%, is it that simple or are there other factors to consider that I’m missing? 

Thanks in advance and again sorry for the hijack.!

It depends if you’re paying tax on your savings interest or not. Assuming you’re not, it’s as simple as comparing the %. If you can get more than 4.01% in savings account without tax on the interest then do that. If not pay it off your mortgage. There are plenty of regular savers much higher than this so it shouldn’t be hard to put away money each month ear marked for your mortgage 

Great, thanks for confirming. You assumed correct, I’m not a high rate tax payer and don’t pay interest on savings (ISA allowance etc).

I will continue doing the same until the rate drops below my mortgage rate. 

marneyr

Archerychick said:

marneyr said:

Hi there, thabks both. 
The lending of the 140-180k would be additional and on top of my existing mortgage. Whether this would be a bolt on or a secondary separate mortgage would need to be confirmed. I could over pay whilst my mortgage interest is so low but as you say interest rated are 4.75% so saving makes more sense. Maybe its the insecure bit of me that takes great pleasure in seeing my fibal mortgage number getting chipped down each month rather than in an isa that numbers dont directly compare. 

I am the same! Set up a spreadsheet that has your mortgage balance, the amount you have saved for your mortgage and therefore the actual mortgage balance - this really works for me! My mortgage is costing me about £30 month right now but I’m saving about £80 in savings interest so it does make a difference to save rather than overpay when you’ve such a low rate.

Mine will be paid off when the current deal ends next year  

Thanks for this. Im not the best in excel but will give it a go. For now i may hedge my bets and pay 300 into an isa and 300 mortgage overpayment. 

BikingBud

marneyr said:

Archerychick said:

marneyr said:

Hi there, thabks both. 
The lending of the 140-180k would be additional and on top of my existing mortgage. Whether this would be a bolt on or a secondary separate mortgage would need to be confirmed. I could over pay whilst my mortgage interest is so low but as you say interest rated are 4.75% so saving makes more sense. Maybe its the insecure bit of me that takes great pleasure in seeing my fibal mortgage number getting chipped down each month rather than in an isa that numbers dont directly compare. 

I am the same! Set up a spreadsheet that has your mortgage balance, the amount you have saved for your mortgage and therefore the actual mortgage balance - this really works for me! My mortgage is costing me about £30 month right now but I’m saving about £80 in savings interest so it does make a difference to save rather than overpay when you’ve such a low rate.

Mine will be paid off when the current deal ends next year  

Thanks for this. Im not the best in excel but will give it a go. For now i may hedge my bets and pay 300 into an isa and 300 mortgage overpayment. 

Try this: http://www.locostfireblade.co.uk/spreadsheet/Index.html 

Use it to build your understanding of excel and your mortgage. But at the moment paying into an ISA would give better return, it will grow quicker and when you come to get the work done you will likely need to borrow less. Although whilst interest rates might go up or down, costs generally only go up. So the ISA growth will be offset against increasing prices, hence a more nuanced perspective might be required. Likely a question about affordability, for your £600 per month can you get the job priced, fixed and started?

Another thought is that too often people only consider the cost of buying a house, whereas the benefits, especially if staying long term, might not be easily quantified, more space, better flow, extra bathroom, new downstairs day room with en-suite for progressing years, more efficient heating. All may not appear to have tangible cash benefits but if they allow you to stay where you are, improve your comfort and enjoyment of the property that might present good value to you.

marneyr

BikingBud said:

marneyr said:

Archerychick said:

marneyr said:

Hi there, thabks both. 
The lending of the 140-180k would be additional and on top of my existing mortgage. Whether this would be a bolt on or a secondary separate mortgage would need to be confirmed. I could over pay whilst my mortgage interest is so low but as you say interest rated are 4.75% so saving makes more sense. Maybe its the insecure bit of me that takes great pleasure in seeing my fibal mortgage number getting chipped down each month rather than in an isa that numbers dont directly compare. 

I am the same! Set up a spreadsheet that has your mortgage balance, the amount you have saved for your mortgage and therefore the actual mortgage balance - this really works for me! My mortgage is costing me about £30 month right now but I’m saving about £80 in savings interest so it does make a difference to save rather than overpay when you’ve such a low rate.

Mine will be paid off when the current deal ends next year  

Thanks for this. Im not the best in excel but will give it a go. For now i may hedge my bets and pay 300 into an isa and 300 mortgage overpayment. 

Try this: http://www.locostfireblade.co.uk/spreadsheet/Index.html 

Use it to build your understanding of excel and your mortgage. But at the moment paying into an ISA would give better return, it will grow quicker and when you come to get the work done you will likely need to borrow less. Although whilst interest rates might go up or down, costs generally only go up. So the ISA growth will be offset against increasing prices, hence a more nuanced perspective might be required. Likely a question about affordability, for your £600 per month can you get the job priced, fixed and started?

Another thought is that too often people only consider the cost of buying a house, whereas the benefits, especially if staying long term, might not be easily quantified, more space, better flow, extra bathroom, new downstairs day room with en-suite for progressing years, more efficient heating. All may not appear to have tangible cash benefits but if they allow you to stay where you are, improve your comfort and enjoyment of the property that might present good value to you.

Agreed. My wife keeps saying its our forever home, and it could be. I just dont like the term "forever" maybe im a commitment-phobe. However, i can see us staying here for the next 20 years so works that will improve quality of living are worth it even if the ROI doesnt stack up  as you say. 

Not sure what you mean by can we get the job price fixed whilst we save 600 a month? Most builders round here would allow a guaranteed price fix/hold but only for 6 months i suspect. Ive made peace with the fact there wont be much change out of 180k so a second mortgage is required, it just comes down to how much of the 180 can be paid up front by monly saving of 600. 

Thank you for the helpful link too 😊