Should I Start Overpaying Now????

LA83

The reason I post this is because... I noticed a lot of guys here are wanting to be mortgage free but are a bit older than me. Im 25 now had my house for nearly 2 years,
My mortgage was for 145000 and i paid a 20k deposit roughly,
I got the ability to make upto 500pounds a month overpayments.

As this is only my first house i was wondering whether to save as much as possible to by my next house without having to get extra mortgage money. Or should i make the overpayments? From what ive seen the overpayments we be cheaper in the long run but i was thinking of moving with in a 2years or 3 from a 2bed terrace to a 3 bed semi.
my mortgage has 3.5 yr fixed at 5.09 left.

any ideas

thanks

Welshlassie

If you start overpaying now it will reduce the amount of interest you pay in the long run and also stand you in better stead when you get you remortgage as you will have a better LTV (Loan to Value) rate so can in theory get better deals.

It will also reduce the length of your mortgage sometimes by a significant amount.

For example by plugging your figures into an overpayment calculator you get the following:

Currently monthly payment approx £892, with £246,344 payable in total over the term, bt with £500 pm overpayment you save £54,604 in interest and knock 11 and half years off your mortgage, effectively halving the length of your mortgage.

If you do decide to overpay, then check out with your bank the following:

• Are you able to overpay without penalty?
• If you can overpay, how much and how often?
• When is your interest calculated and applied to your mortgage (so you know when to pay your overpayments, should be just before interest is calculated)?
• That the overpayment is applied to the capital and not the interest.

Good luck and welcome to the world of MFW.

LindsayO

When you sell your current house, the price you get for it will have to cover what is left on your mortgage. Hopefully by the time you sell the crash will be over and house prices will have recovered and you will get more than you paid for it, so that the sale price will cover the mortgage, your initial deposit and then some.

suppose you put £500 amonth into overpaying the mortgage, this will reduce the capital owing on your mortgage and the amount of interest that you pay.

suppose you put £500 month into a savings account, unless you make more interest on the savings acount than you are paying on your mortgage, you will in effect be losing money

so I say overpay

LA83

Thanks for your help both of you
very kind

janken

Firstly you could take out a cash isa wich could give you a little extra above and beyond the intrest you would save.
Secondly the 10% pluss savings accounts are proably taxable and will work out much less viable.

you are very luck to be in that position at your age. I would be tempted to over pay if your lender allows it. As in the previous replys you will reduce the capital and save a whack in interest.

---

Ken :beer:

JonnyBravo

All of the above about rates etc is true but the info about your wanting to move is crucial. This in turn makes the post about your ISA is most important.


In short, you will be able to do better in your ISA than in your mortgage and more importantly if you're looking to move in 2-3 years you'll need some savings to pay for all the bills that come associated with moving house.

I say Save in a cash ISA the max amount first (£3600) then look at options if you have anything left over.

dimbo61

cash ISA,s paying 6.5% tax free V overpay on mortgage save 5.09%
You do the maths ! save into a cash ISA £3600 this year then if you have
any more money spare overpay IF ALLOWED ?
£3600 in ISA after april next year and then see what deals you can get then.
GOOD LUCK

getmore4less

Overpaying will reduce the interest paid but you can get close to that by saving.

By saving up enough to move without extending the loan, as long as the mortgage is portable, you may find it easier than having to extend and remortgage

These days with the loan market uncertain the old plan of overpay as much as you can needs to be reconsidered if moves are planned.


I would if starting out now seriously consider interest only and save or offset, it is always easy to decrease borowing but not allways easy to increase.

neil9313

LA83 wrote: »

The reason I post this is because... I noticed a lot of guys here are wanting to be mortgage free but are a bit older than me. Im 25 now had my house for nearly 2 years,
My mortgage was for 145000 and i paid a 20k deposit roughly,
I got the ability to make upto 500pounds a month overpayments.

As this is only my first house i was wondering whether to save as much as possible to by my next house without having to get extra mortgage money. Or should i make the overpayments? From what ive seen the overpayments we be cheaper in the long run but i was thinking of moving with in a 2years or 3 from a 2bed terrace to a 3 bed semi.
my mortgage has 3.5 yr fixed at 5.09 left.

any ideas

thanks

'

You need to give more details re mortgage, offset? can you pay any more off without a fee?

shirlgirl2004

You also need to remember that your deposit is payable on exchange of contracts so you need cash in the bank to make that payment. Typically the desposit is 10% of the purchase price but is negotiable.

LA83

Today i made the full 500 pounds overpayment on my mortgage, its the first time i've paid the full amount over and i'm now up to 1400 for the year.:j

Im remortgaging in 6months im gonna try and get the ball rolling now.

If the new rate reduces my payments enough, i'm going to try and drop the term by a year so i'm still paying the same amount roughly. If thats possible.

Cant wait to pay this debt off!!