Paying off my mortgage early where do I even start?

Tumzbuckets

Hi all,

Been reading a lot on here and finally thought I’d post. I’m starting to look into overpaying on my mortgage but not really sure what’s the best way to go about it.

There’s loads of calculators out there, but I one and was messing about with the numbers its called checkawage.co.uk 

It’s mad even just overpaying £100 a month looks like it could knock years off the term. Does that actually work out in reality? Feels like I found a life hack late in life :-) 

Is anyone else overpaying regularly? How much are you managing to put in, and do you just do it monthly or as and when?

Part of me also wonders if I should be putting spare money into savings instead, especially with interest rates being a bit better now. Not sure what’s the smarter move.

Would love to hear what others are doing.

Sorry for all the questions, but one more this is do people plan for when they want the mortgage paid in a strategic way? Like obvs before pension or something? 

powerspowers

Hi Tumz,
have a look at the diaries to see peoples different approaches. I didn’t start with a grand strategy, just set a monthly affordable overpayment against the mortgage. Nowadays I set an annual goal to keep myself motivated and have joined the one year and three year challenges in this board. Others make smaller more frequent payments, it’s what works for you. I save my OPs in a fixed saver as the interest is higher than my mortgage, I then pay off at the end of the year. 

Paying off the mortgage should be balanced with your other financial needs & goals. Definitely have an emergency fund in place, overpaying your mortgage isn’t going to help replace a broken boiler etc. and look at your pension provision, the tax relief on saving in a pension means your money goes further and it’s better to save earlier in life than throw everything at it later. I found that process quite overwhelming so my suggestion would be make one small action now and figure it out from there. 

comfortzone

As long as you don't have any other more expensive debt like credit cards etc, then it can be a good idea. There is lots you'd need to consider though. If your mortgage rate is less than what you can get in savings then I would personally think about putting your money in to savings rather than over paying the mortgage. If you have £100 a month spare then you might like to put the money in to a regular savings account for example the Principality six month regular saver at 7.5%.
There's a large number of regular savers out there with rates which are potentially higher than your mortgage rate.
The benefit of this is not only could the interest rate be higher but you could access that money in a real emergency. You may not be able to get the money back if you put it straight in to your mortgage. It would also depend on how much savings you already have of course and whether you would end up paying tax on the interest which could affect whether it is worth it. I'd also make sure I had enough of an emergency fund outside of these dedicated savings to pay for other things like powerspowers says.
You'd need to be disciplined though and not be tempted to spend it!
I put spare money in to several regular savers as I could get a higher interest rate then my mortgage between 2010 and 2021. I ended up paying my mortgage off 8 years early by using the lump sum to overpay at the end of my fixed term once the savings balance equalled the mortgage balance. Had I kept the savings which where a higher interest rate than the mortgage I could have made more money but at that point I just wanted to pay it off.
You'd also need to consider what making a large one off payment from those savings would cost you in terms of ERCs and time it so that you pay as little as possible or ideally at the end of your fixed rate if you have one. 
Some people consider it better to use spare money for stocks and shares or a pension, etc which is a personal choice.
Personally I am very, very happy with the decision I made despite the fact that I potentially could have had a better return if I had invested elsewhere. 

Jami74

I make a £300 overpayment to my mortgage on the first of every month. It was a 20 year term and the overpayments should reduce it by six years. My aim is to have it completely paid in ten years, hopefully interest rates will be lower when it's time to remortgage and I'll get pay rises so each year so can increase the overpayment amount.

UnsureAboutthis

I'm sure you have but does you lender allow overpayments etc and if so, to what extent.
One of my children is paying off more than the amount required per month but there is a limit
of how much extra he can pay off every year. He has a fixed rate for 5 years IIRC and a loan
of 300k plus aiming to pay off in ten years as opposed to the 20 he originally took out about 7 years ago

So check the T&C and most will have early completion charges etc.