help needed please

mhe

A bad day at work and looking at all your posts has inspired me to start overpaying on our mortgage - im 38 and want to be retired at 50!!!!

The thing is i have no idea how to go about it. Some months i could manage extra other monthe not as much - do i have to agree to a regular monthly sum or just bits as and when. Is there a minimum payment and how do you make the payment - in person at the BS or what?

Sorry for being such a thickie and hoping you can help.
MHE

mitchg

it all depends on your mortgage and mortgage supplier and their restrictions post on here who the mortgage supplier is and what type of mortgage you have and lots of suggestions will come your way to help you think it over and help you on your way.

mhe

mortgage is straight repayment with A+L on a deal for 5 yrs taken out last Sep but i remember financial adviser saying we could make overpayments on it if we wanted but i didnt want to then so dont know anymore info.

abouttimetoo

mhe wrote: »

A bad day at work and looking at all your posts has inspired me to start overpaying on our mortgage - im 38 and want to be retired at 50!!!!

The thing is i have no idea how to go about it. Some months i could manage extra other monthe not as much - do i have to agree to a regular monthly sum or just bits as and when. Is there a minimum payment and how do you make the payment - in person at the BS or what?

Sorry for being such a thickie and hoping you can help.
MHE

Hi Mhe

Sorry to hear you have had a bad say at work but well done on your decision to start overpaying in your mortgage (i'm keen to retire at 50 as well )

Before you start it would be best if you found out a few things as these will help your overpaying decisions and also let us help you out with some advice - mind you I'm no expert (yet:rolleyes: ), I just started this myself 2 months ago. So check out the following;

Does you mortgage provider allow you make overpayments?
If so is there any maximum overpayment before you would incur penalties and what would they be?
Is your interest calculated daily?

Depending on what the answers are (come back and tell us) you can then think about your overpayments

In terms of amounts – every little helps, you’d be surprised how much – have a look at one of the mortgage overpayment calculators within the sticky at the top of this board.

Again depending on whether you are restricted by your mortgage company you could pay as little or as much as you want (the same applies if you want to join our 2008 MFW ‘club’ that bellsbells kindly manages for us).

There are many ways to make overpayments (again depending on what your company say about penalties etc) you could do a standing order for a regular monthly amount, you could ask them to take ‘extra’ money per month on top of your usual payment, you could send them a cheque and in some cases you can overpay at the counter of your local branch, finally you could do it all yourself via internet banking if your MP has this facility. Oops, I said finally, not quite, you could do a combination of the above i.e. some people have a standing order for the minimum they know they can afford then make additional payments as and when they can afford it by one of the other methods.

So give your MP a call and then let us know

Regards

mhe

OK have wriiten the questions down and will ring A+L tomorrow and see what they say. Out of interest why does it matter if they calculate interest daily as opposed to any other way?

gallygirl

mhe wrote: »

OK have wriiten the questions down and will ring A+L tomorrow and see what they say. Out of interest why does it matter if they calculate interest daily as opposed to any other way?

Yes, it does matter. If your MP charge interest daily then if you OP £500 today from each day onwards your daily interest is calculated on a sum £500 lower, saving you interest and meaning a v slightly higher amount of your normal mortgage payment goes on reducing capital, not on paying interest.

If interest is calculated annually they don't credit your OP's until the end of their year so you gain nothing by paying in month 1 as opposed to month 12. If that is the case you bung the money in as high an interest account as you can find (starting with an ISA) then pay off as a lump sum in month 12. That way you get interest on your savings.

If you are with A&L I think you'll find it's daily interest. So every day counts

abouttimetoo

mhe wrote: »

OK have wriiten the questions down and will ring A+L tomorrow and see what they say. Out of interest why does it matter if they calculate interest daily as opposed to any other way?

Oh blimey, hope I can explain this clearly enough :rolleyes: If for example you owe £1000 on January the first and then overpay by £100 on the 10th of january your interest will be on £1000 for 9 days then the balance will be reduced to £900 and you will be charged interest on the lesser amount from 10th January onwards

Some companies charge interest monthly so it won't be to your advantage to OP mid month - in the example above you would still be charged interest on the full £1000 for the month so you might as well wait until the end of the month. for OP's Also, would you believe some do it annually although I believe this is pretty rare now. Bottom line is that daily interest is best

My own company is daily interest, as many overpayments as I want via wahtever I want (I do it on-line) but...... if I want to do lump sum by cheque it must be more than £1000 - they all have their funny little ways ay

abouttimetoo

Thanks ali007, forgot the bit about meaning that more of your normal payment goes to the capital

mhe

Right I rang A+L today and the answers to the questions are

1. I can overpay by £499 a month (and 10% of balance in January only) any more and I would incur penalties.

2. Interest is charged daily but the amount i pay each month would not be altered until Jan. (does this matter?? )

So what now - just get cracking with the OP or is it more scientific than that?

Welshlassie

1. That's fine, unless you want to pay more than £499 each month, in which case, pay the 499 into the mortgage and any extra put in a high interest savings account to pay off in january each year.
2. Pay the OPs in whenever you have them so your interest is calculated accordingly on the reduced balance and when Jan comes round ask them not to adjust the monthly amount you pay so the extra will continue to act as an OP.

HTH and best of luck
Welcome to the MFW gang

abouttimetoo

mhe wrote: »

Right I rang A+L today and the answers to the questions are

1. I can overpay by £499 a month (and 10% of balance in January only) any more and I would incur penalties.

2. Interest is charged daily but the amount i pay each month would not be altered until Jan. (does this matter?? )

So what now - just get cracking with the OP or is it more scientific than that?

Great stuff. Yip, all you need to do now is decide how you want to send your overpayments and then get cracking:D

Good luck