Is my overpayments making a difference?

khowe

I have a mortgage of 114,000 with just over 23years left. I have been making overpayments of £50 a month. I am due to come to the end of my fixed rate - do you think this £50 a month has benefited me at all? I am very confused.

I am thinking about overpaying by £200 a month but am unsure of the benefits?

tonydee

Depending on what interest rate your on, you'll be saving something like 3 years and about £12k in interest.

Keep it up

CLAPTON

basically, it makes sense to overpay a mortgage assuming you have no other debt, as the interest on the mortgage will be greater than the interest you can earn in a savings a/c

and yes the 50 will have benefitted you .. if you post the APR and the monthy repayments I'll work out the approx figures.

tsharp

khowe, you mortgage is almost identical to ours, same amount and term etc. Does anyone know roughly when the monthly payment amount will drop?

angelavdavis

I overpaid by £2000ish in total between the months of April and November 2007 but updates to my monthly payments were annual, so no immediate effect. However, the overpayments were reflected when I remortgaged and the total owed dropped by the £2000ish, although the interest rate jumped from 4.24 to 6.1%.

Had I not overpaid, my payments would have jumped from
£840.88 per month to over £1000, however, my payments were recalculated to £960!

tsharp

So it deffo is worth it. Plus, logging into the mortgage account online will show you the amount to repay decreasing etc i guess.

davetrousers

It depends on what your fixed rate is compared to what you could get in a high interest savings account. Doesn't it???

angelavdavis

Yes and also whether you are a tax payer - I am a high tax payer and would need to be earning about 10% on my savings to realise the same benefit I do by overpaying my mortgage.

I do utilise my ISA allowance too to ensure I am getting the most out of my savings.

barnaby-bear

khowe wrote: »

I have a mortgage of 114,000 with just over 23years left. I have been making overpayments of £50 a month. I am due to come to the end of my fixed rate - do you think this £50 a month has benefited me at all? I am very confused.

I am thinking about overpaying by £200 a month but am unsure of the benefits?

If you keep the money as savings and get made redundant you'd be expected to meet your bills from savings before benefits kick in. If you put it on your mortgage then lose the job/get sick then not only will your outgoings be lower but benefits will kick in earlier. Kind of insurance and security policy - it'll give you longer to get back to work. Overpay and extra baby/illnes comes along - no problem with a mortgage vacation. Take it to the extreme - pay the mortgage off completely - if suddenly but you'll get by on benefits with no housing costs.