Are we in a small minority?

pawlala · 17 May 2010 at 8:10AM

I overheard someone at work the other day saying they had just finished paying the final payment towards a 25 year mortgage, this guy was in his late 50s early 60s in a well paid position so I'm guessing they either didn't know that overpaying exists or simply didn't have the motivation to pay off the mortgage earlier. I myself wasn't really aware that I was able to make extra payments until I came on here and read the diaries whilst researching about variable rates when my fixed term was expiring.

This got me thinking... what proportion of mortgage owners actually know that overpaying exists? I'm not talking about those who know but choose not to because they can't afford it.

Are we in a very small majority in here? I doubt we could ever get a definitive figure but your stories about how you first knew about overpaying may help?

cha97michelle · 17 May 2010 at 9:11AM

We were told about it when we applied for the mortgage that the facility was there. We had a face to face meeting with a mortgage adviser in the branch and she said it was something she did.

I think it probably depends on how you apply for your mortgage, the opinion on overpaying offered if in a face to face meeting, and then what you experience. I would have thought it was quite common knowledge particularly when programmes on the telly have looked at the topic, although because things like pay off the mortgage in 2 years were extreme, then it might have put some off trying at all.

There is also family and friend influence. My parents have never done it and always think i am mad when i suggest it as though there is more to life in the good times and you carry insurance to cover the bad times. My ILs are in favour in principle but would be horrified to do without to overpay. I don't personally have any friends who do it, although my DH works in a company with just 2 other employees and they all do it and discuss it.

Maybe if Martin pushes through his financial education plans the next generation of house buyers might be more aware of their options.

lil_lisa · 17 May 2010 at 9:34AM

I think a lot of people are probably aware that it is possible to overpay a mortgage, but not aware of just how much money it would actually save them. I didn't until I started playing around with a few mortgage calculators.

I kind, I don't think people really realise how much extra it costs them to take a mortgage break. If either of these things were publicised more I think the mortgage industry would be very different today. If someone said to you that paying an extra £50 a month could save you £16000 you'd probably be more inclined to find that £50!

drewwa · 17 May 2010 at 10:03AM

Makes me wonder sometimes.

I'm the only person I'm aware of in my circle of friends who is overpaying (and also not extracting any equity from the house) my mortgage. Most of my friends seems to work on the principal of keeping the monthly payment as low as possible, so as to maximise disposable income.

My parents never did this and they think I'm being unduly cautious in overpaying as dramatically as I am (I've benefitted from the collapse in interest rates as I have an offset tracker pegged 0.95% above the baserate, but haven't changed the repayments).

I wouldn't say I 'went without' as a result, but I run much older cars, have lower-key holidays and have not invested much in redecoration or refurbishment compared with my peers.

Those friends I have discussed it with usually claim they "can't save" or "that works for you but it wouldn't work for me"

Cheers,

Drew.

dzug1 · 17 May 2010 at 10:28AM

Well yes, I've always been aware that overpaying was possible.

In the early days I didn't because I just couldn't afford it.

In the later days it just wasn't worth it - the interest part of the payment had dwindled to next to nothing, and there was always the thought (possibly illusory) that if I ever needed another mortgage an established relationship with a supplier might help.

Luv2Budget · 17 May 2010 at 10:38AM

I agree with all the above comments. A lot of people think it is a bad idea, and think a mortgage should be for 25 years!

I knew about overpayments as soon as I had a mortgage because I read up on information re flexible mortgages, etc. I started overpaying straight away. People don't realise that even extra small monthly amounts make a difference.

And I agree about the various calculators - they are really an eye opener! - I can't recommend the Guardian calculator enough. As well as telling you how much interest you save, it also shows you how much you will owe in 5, 10, 15 years etc...

I haven't really told anybody I'm overpaying because I can tell from the reaction from some people when I mention overpaying, that this is some how strange!

Jonbvn · 17 May 2010 at 11:12AM

drewwa wrote: »

My parents never did this and they think I'm being unduly cautious in overpaying as dramatically as I am (I've benefitted from the collapse in interest rates as I have an offset tracker pegged 0.95% above the baserate, but haven't changed the repayments).

I hope you realise that you would be much better saving in cash-ISA's paying 3%+ rather than OPing a mortgage at 1.45%?

On my circle of professional acquaintances OPing on mortgage seems to be quite common. Although AFAIK, those of us on low trackers have stopped OPing over the last year, and are using the money to get a better return elsewhere.

Brodiebobs · 17 May 2010 at 11:26AM

I never knew overpaying existed until i came accross this site!
Even though we are on a low income compared to most on here, we manage overpayments every month, hoping that this along with increased incomes in the future can mean we will be mortgage free in early 30's. Just glad i found out while young!
More spurred on really by the fact recently my parents paid off their mortgage in their 50's even though they only bought it for £21k in the 80's!!!!

greent · 17 May 2010 at 11:33AM

I used to work in lending, so have always been aware. My mum didn't get a mortgage until she was in mid 30s and it's not due to finish for another 5+ years now (she's 60 this week) - what a scary thought!

We didn't overpay at first because we didn't have the money. We overpaid on our old house at times (a little in regular OPs and some lumps from SAYEs) This house we didn't start OPs straight off because we increased our mtge by 100k and I was 7months pg with child no 3 when we moved and didn't go back to work after mat leave. We made a couple of lump sum payments from endowments and shares and redundancy, but also took a f/adv for a loft conversion (child no 4 on the way by then!) We're in a fix and can OP by 10% pa. I'll be lucky if we can achieve the full 10% this year, but anything is better than nothing. My OH was made redundant twice last year and has only 3 months left on his contract for the job he's in now (unlikely to be renewed) so we're being a bit more cautious with funds in general at the moment

drewwa · 17 May 2010 at 11:59AM

Jonbvn wrote: »

I hope you realise that you would be much better saving in cash-ISA's paying 3%+ rather than OPing a mortgage at 1.45%?

Sorry, not being entirely clear. I tend to think of all money associated with clearing the mortgage as being 'overpayment'. Yes, I have an ISA for the excess funds from the point the my personal interest rate dipped below the ISAs. :beer:
Cheers,

Drew.

sulkisu · 17 May 2010 at 12:05PM

pawlala wrote: »

I overheard someone at work the other day saying they had just finished paying the final payment towards a 25 year mortgage, this guy was in his late 50s early 60s in a well paid position so I'm guessing they either didn't know that overpaying exists or simply didn't have the motivation to pay off the mortgage earlier.

It's more like that he coudn't afford to overpay. He might have a well paid job now but you don't know what his finacial or personal circumstances are and have been over the past 25 years (e.g. 6 kids, stay at home wife, house remortgaged, previous debts, elderly parents to support, previous redundancy or ill health). You can afford to overpay - great - but not everyone is that fortunate. Many are struggling just to pay their mortgage, let alone overpay it.

Are we in a small minority?

How long were you on the property ladder before you began to plan your overpaying? 130 votes

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