Offset or overpay?

skintchick

Hi there - having been inspired by other poeple on this board, I've decided I want to get rid of my mortgage as quickly as possible.

But I don't know which of the above options is best.

I have a mortgage for £52,000 over 25 years, on a fixed rate until July 2007, so until then it is hypothetical, but I like to plan ahead :rolleyes: .

I currently pay £312.41 a month on a repayment basis (is that the right term? Not endowment anyway).

I am about to get a lodger, and will be able to put up to £320 extra into the mortgage. Could be up to a further £183 - total £503 - if my second job comes through with the hours. Without a lodger or the second job, I can allocate just £50 a month extra.

However, after Feb 07, I will have £173.67 a month freed up as my car loan will be paid off.

I have £1,500 savings in an ING account.

What's the best thing to do? I am 30 and would love to be mortgage-free by the time I hit 40. :j Is this possible?

Advice please!

calleyw

Personally I would say is to pay off your debts first.

Then with the money you have after paying off the debts use that to over pay the mortgage.

And to offset you really need about 40% of the mortgage. Offset mortgages can be a little bit higher on interest rates as well.

Yours

Calley

skintchick

Please ignore the debt - it is pretty much all car loan at 0% so it's irrelevant. THe cc is peanuts and will be paid off in two months' time.

Can you re-advise with this in mind? Thanks

calleyw

skintchick wrote:

Please ignore the debt - it is pretty much all car loan at 0% so it's irrelevant. THe cc is peanuts and will be paid off in two months' time.

Can you re-advise with this in mind? Thanks

Up to you but I don't see it as being irrelevant you have debt it does not matter if it is on 0% or not. It is still debt and something you are paying out every month. If you don't have the debt then you would have X more to be thrown towards the saving for when you re-mortgage.

Did you read the rest of what I wrote that offset mortgage have higher interest rates and to make it worth while you need to have at least 40% of the mortgage offset in savings. Which means on a 52K mortgage you would need in the region for 20K (saving approx £909 per month)is that doable to save between now and July 2007.

Also who knows that offers are going to be on the table come July 2007 that is nearly two years away.

When you are looking for a new mortgage in 2007 you need to look what overpayments you can make and when. I know nationwide at the moment allow £500 a month with out any pentalities.

Looking at the first direct website and using there caluclator on a interest rate of 5.5%(5.7%) Your payments on a 25 year £52K mortgage with £1500 offset is £312.47. But if you increased your monthly payments to £500 a month it would take 11 year and 7 months to pay off.

With out the offset of £1500 your montly payments would be £319.33 and with increasing your payments to £500 it would be 11 year and 7 months to you are paid off.

It can be done but I think you are relying on things like a lodger and second job to pay this off. And you might not always have those.

With the extra £50 a month it would reduce a 25 year mortgage to 19 years and 7 months so it would shave a bit off.

Try the calculator yourself as you can change the length, interest rate, offest etc. It is here

Might help you make up your mind.

Yours

Calley

skintchick

I've tried the calculators but they don't seem to answer my question. I find them confusing and wanted some help.

I have to say that if I had 40% of the mortgage saved I would use it to pay off the mortgage, not sit on it, so I think an offset is not my cup of tea.

Would have been nice if you'd been a bit less judgemental, as I was asking a question and providing ALL the scenarios/information in order to help people advise me.

I quote: Up to you but I don't see it as being irrelevant you have debt it does not matter if it is on 0% or not. It is still debt and something you are paying out every month. If you don't have the debt then you would have X more to be thrown towards the saving for when you re-mortgage.

No !!!!!!, Sherlock! I was simply giving all the information. And just because the mortgage isn't up for renewal doesn't mean I can't overpay NOW.

I'm not stupid, you know.

calleyw

skintchick wrote:

I've tried the calculators but they don't seem to answer my question. I find them confusing and wanted some help.

I have to say that if I had 40% of the mortgage saved I would use it to pay off the mortgage, not sit on it, so I think an offset is not my cup of tea.

Would have been nice if you'd been a bit less judgemental, as I was asking a question and providing ALL the scenarios/information in order to help people advise me.

I quote: Up to you but I don't see it as being irrelevant you have debt it does not matter if it is on 0% or not. It is still debt and something you are paying out every month. If you don't have the debt then you would have X more to be thrown towards the saving for when you re-mortgage.

No !!!!!!, Sherlock! I was simply giving all the information. And just because the mortgage isn't up for renewal doesn't mean I can't overpay NOW.

I'm not stupid, you know.

Well if you think I was being judgement that is up to you. I was stating what most other debt boards and fourms would tell you. Pay off your debts first and then work on your mortgage. Maybe I should have put "personally I dont see it as being irrelevant"

You state about over the paying the mortgage NOW But you say in your first post "I have a mortgage for £52,000 over 25 years, on a fixed rate until July 2007, so until then it is hypothetical, but I like to plan ahead" So what is now or in July 2007. But can you over pay? Some mortgages with a fixed rate you can't over pay. So would have thought that was one of the first things you would have checked out before asking the question here.

And glad to see you have grasp of the english language. And where did anyone say you where being stupid. You and only only you did.

But each to there own. I am sure that someone who is not "Judgemental" will be along soon and give you the same info I have.

Yours


Calley

skintchick

I have checked out if I can overpay. And I can.

The changing mortgage part of it was hypothetical, but the question about offsets v overpaying was not.

Your post implied I was being stupid - a thing does not have to be directly stated for it to be implicit in the subtext. Yes, I do have a good grasp of English, thank you very much.

Where's the funky gibbons with his great advice when you need him?

Corley

if you cant over pay on your mortgage because its a fixed rate, either overpay on your car loan if this is possible and get that out the way or use the money you would be using to overpay and save it up untill you remortgage and use it then as a lump sum?

skintchick

But I CAN overpay. Up to a certain amount granted, but I am allowed to.

I think if you need 40% of your mortgage value in an offset account to make it worthwhile, then overpaying is the route to take.

Rikki

If you decide to over pay your mortgage. You can choose the amount to over over pay by each month and very the amount depending on what free funds you have avaliable at the time.

calleyw

skintchick wrote:

I have checked out if I can overpay. And I can.

The changing mortgage part of it was hypothetical, but the question about offsets v overpaying was not.

Your post implied I was being stupid - a thing does not have to be directly stated for it to be implicit in the subtext. Yes, I do have a good grasp of English, thank you very much.

Where's the funky gibbons with his great advice when you need him?

Now I am getting very hacked off. Where did I imply you where stupid. I laid out info so that any one who read it could understand it.

You seem to think because I mentioned paying off your debt first and you saying that it was not important is suggesting that I said or implied you where being stupid. I can't even begin to work that out.

You did not state anywhere in your first post that you could overpay. Which would have been handy info to have. So I had to assume that you could not because you said you on a fixed rate until 2007. So based everything around the 2007 date.

Over pay now until the fixed rate comes to an end and then see what is
about then and will be best.

Why oh Why do I bother. When I try and help some decided to jump on you and accuse you allsorts and even sworn at.

Last time I bother. If this is the sort of reaction I am going to get.

Yours

Calley