Overpay Mortgage or Loan????

itsnever2lateisit?

They are all different in fact, just to muddy the waters and make judgements harder. Some are fixed interest, some have withdrawal penalties etc, take a look at Martin's guide http://www.moneysavingexpert.com/banking/

Poosmate

Hi Tegai,

For a start, I would definitely open an ISA and get some savings behind you even if it's just £100pcm.

I don't know what I would do regarding the loan/mortgage, I'm tempted to say pay off the loan as soon as possible as the interest is slightly higher than the mortgage. There's got to be some benefit to doing that surely otherwise you wouldn't have a settlement figure £2k less than the actual balance or am I missing something?

Oooh I don't know! I'm feeling very indecisive!

You could of course do all three! Make overpayments of £100 on your loan and you mortgage and £100 into an ISA? You could always review the situation every 6 months or so. That way you're options are always open.

How long is your interest going to be 6% on your mortgage? Is it a fixed rate for so many years? I mean if it is, and you go back onto standard variable rate will it still be lower than the loan.

Shame on me, I haven't kept up with mortgage rates recently but I do know that whilst the BofE is lowering the interest rates, the mortgage lenders are no passing it on to us customers (yet). I guess paying more off your mortgage is always a good thing especially if you have a low % rate, I mean it's like insurance for when rates go up again. (I remember when they went to 15%! Eek!)

If you do £100 extra off the loan, in 2 years you will have paid £11760 so your balance would be just under £4k, I wonder what the settlement figure would be then? And you'd have just 8 months left to pay but then you'd have an extra £490 to pay off your mortgage (but that would put you over the £5k overpayment).

ooh! I still don't know what I'd do! LOL

Sorry I'm not much help am I? lol

Hope you make the right decision!

Poo

Poosmate

Oh dear! I think I should stop trying to offer advice on this site! LOL!

Itsnevertoolateisit? has hit the nail right on the head!

I wish I could do that. Do you know how long it took me to ponder the situation, think about what I would do and then decide that I wouldn't be able to decide what to do?.......


AGES!!!!!

No wonder I'm in debt! lol

Oh well!

I'll move on to the next post and give someone else the benefit of my indecision and weired round about way of thinking!

I wish I could think more clearly...... mutter, mutter, mutter.......

poo

never_too_late_2

Hi Tegai,

We overpay our mortgage but about 100 quid a month and thus this reduces the interest a little. But also in a bonus type way, it sits in a sort of saving pot that we can withdraw from if need be or use make a payment etc.

I'm by no means an expert but if I was you I would do this:

1. Save into an ISA as a priority so that you have rainy day funds and savings
2. Pay off loan
3. Start acting mortgage!

Good luck!
NTL
-x-

tegai1

Thanks for all your help, it's been very useful.

Ok guy's this is what I’m going to do (please tell me if I’m off the mark!)

Priority one - Pay £200pcm into savings for a rainy day (ISA), If not needed in the next two years use it to pay off the settlement figure of the loan.
Priority two - Pay £100/£200pcm into the mortgage.

Once the loan is paid off i will have an extra £580pcm to use in-case of emergency. But I can use £300 of it to max my overpayment on the mortgage.

So basically I will be cutting 1yr 11months off my loan and saving loads of interest on the mortgage. Woo hoo....

Now let’s all cross fingers and hope nothing crazy happens in the next two years ruining my master plan :j

P.S.

Northern Rock made it very clear that the difference in the balance and the settlement figure is due to me getting a refund on the interest I paid up front. (frontloaded loan). Therefore I only save on interest if I pay the loan off in full.