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  • FIRST POST
    • Drucifer
    • By Drucifer 7th Jan 18, 3:07 AM
    • 19Posts
    • 16Thanks
    Drucifer
    Mortgage Overpayments
    • #1
    • 7th Jan 18, 3:07 AM
    Mortgage Overpayments 7th Jan 18 at 3:07 AM
    Hello,

    My fiance and I are setting aside money each month to overpay the mortgage, currently £100.00 a month.

    The idea is to save the £100.00 a month up until our first mortgage term is over (August 2022), then remortgage with the money saved as another "deposit" to reduce the term of the mortgage.

    We're currently saving it in premium bonds, just so that it's set aside from the rest of our money and there's the, albeit minuscule, chance of winning the million.

    There's a lingering feeling in the back of my mind that saving the overpayments in premium bonds isn't the best idea, as of course it earns no interest and the chances of winning anything are slim.

    I've considered investing it, (I'm already investing separately for retirement), but with less than 5 years I'm not 100% sure on this idea either, as it could drop a lot in value when I need it & I'm not sure what level of risk is advised for a 5 year time frame with money I will need.

    Or should I just phone up the lender and overpay the mortgage each time there's enough money to cover another payment?

    Is there a best choice here or is it down to personal preference?

    I appreciate any input.
Page 1
    • AlexTheLion
    • By AlexTheLion 7th Jan 18, 3:18 AM
    • 17 Posts
    • 15 Thanks
    AlexTheLion
    • #2
    • 7th Jan 18, 3:18 AM
    • #2
    • 7th Jan 18, 3:18 AM
    Have you not considered saving your extras in cash accounts? 3-5% interest accounts available from various providers with instant access if required. Or at least filling up the larger paying ones before heading towards the PB. I like the idea of the 'in it to win it' with premium bonds, but would be disappointed with no returns at all that could have been in a cash account.
    • Drucifer
    • By Drucifer 7th Jan 18, 3:31 AM
    • 19 Posts
    • 16 Thanks
    Drucifer
    • #3
    • 7th Jan 18, 3:31 AM
    • #3
    • 7th Jan 18, 3:31 AM
    Have you not considered saving your extras in cash accounts? 3-5% interest accounts available from various providers with instant access if required. Or at least filling up the larger paying ones before heading towards the PB. I like the idea of the 'in it to win it' with premium bonds, but would be disappointed with no returns at all that could have been in a cash account.
    Originally posted by AlexTheLion
    Thank you for your input.

    I did briefly consider saving it in a cash account, I've already got many accounts each with a specific purpose and to my knowledge, though could be wrong, I'd need a particular amount of Direct Debits to pay out or a certain amount to pay in to qualify for interest, just too much juggling around for my liking and extra things to track, and I prefer my Direct Debits to be at an absolute minimum.

    So not my first choice, but can be done if this is the best option.
    • kezzygirl
    • By kezzygirl 7th Jan 18, 9:12 AM
    • 661 Posts
    • 701 Thanks
    kezzygirl
    • #4
    • 7th Jan 18, 9:12 AM
    • #4
    • 7th Jan 18, 9:12 AM
    Thank you for your input.

    I did briefly consider saving it in a cash account, I've already got many accounts each with a specific purpose and to my knowledge, though could be wrong, I'd need a particular amount of Direct Debits to pay out or a certain amount to pay in to qualify for interest, just too much juggling around for my liking and extra things to track, and I prefer my Direct Debits to be at an absolute minimum.

    So not my first choice, but can be done if this is the best option.
    Originally posted by Drucifer
    Nationwide flexdirect have 5% interest and you only have to pay in £1000 per month- no direct debits. You font have to keep the 1k in there, I just do it by standing order and transfer it straight back out
    • bertpalmer
    • By bertpalmer 7th Jan 18, 10:09 AM
    • 97 Posts
    • 43 Thanks
    bertpalmer
    • #5
    • 7th Jan 18, 10:09 AM
    • #5
    • 7th Jan 18, 10:09 AM
    Personally I would invest it. My thoughts are that you could easily make 10% a year on it. Minimum. But that!!!8217;s just my attitude to risk - assuming 3 year minimum period.

    Premium bonds wouldn!!!8217;t be on my radar as an option.
    • atush
    • By atush 7th Jan 18, 11:33 AM
    • 16,806 Posts
    • 10,488 Thanks
    atush
    • #6
    • 7th Jan 18, 11:33 AM
    • #6
    • 7th Jan 18, 11:33 AM
    If you have emergency cash, cosider a s&s isa as well

    What are your pensions like?
    • LHW99
    • By LHW99 7th Jan 18, 12:01 PM
    • 1,316 Posts
    • 1,214 Thanks
    LHW99
    • #7
    • 7th Jan 18, 12:01 PM
    • #7
    • 7th Jan 18, 12:01 PM
    What is the current mortgage interest rate? If that is more than about 3%, and you are able to overpay without penalty, then overpaying as you have funds could be a good option, as you would then be reducing the interest you pay overall and will build up equity in the current property to rollover.
    • Drucifer
    • By Drucifer 4th Feb 18, 3:01 PM
    • 19 Posts
    • 16 Thanks
    Drucifer
    • #8
    • 4th Feb 18, 3:01 PM
    • #8
    • 4th Feb 18, 3:01 PM
    Our mortgage rate is 2.80%, I'm a basic rate taxpayer on a relatively "low" Income, I've a pension that my employer contributes to (4%) and I salary sacrifice 3% for my own contributions, at the rate that I'm contributing to my Vanguard ISA my pension is looking like the supplement to my retirement.

    We've been buying PB's thus far and we've won nothing, pretty much 5 months so far without any growth, so I've been thinking about investing, anyone got any suggestions for the timescale? (August 2022)

    As mentioned I do have a Vanguard ISA so I'd prefer to invest within there.
    • kidmugsy
    • By kidmugsy 4th Feb 18, 3:03 PM
    • 10,842 Posts
    • 7,419 Thanks
    kidmugsy
    • #9
    • 4th Feb 18, 3:03 PM
    • #9
    • 4th Feb 18, 3:03 PM
    About four-and-a-half years? Then regular savers yielding 5% p.a. are your best bet.
    Free the dunston one next time too.
    • justme111
    • By justme111 4th Feb 18, 3:30 PM
    • 3,000 Posts
    • 2,899 Thanks
    justme111
    depends on the mortgage terms. you can phone tgem and ask if you can increase your payments by £200 a month and avoid faff and temptation to use that miney cor other purposes - that is if you are allowed to . If not - regular saving accounts as suggested.
    • ValiantSon
    • By ValiantSon 4th Feb 18, 6:21 PM
    • 2,013 Posts
    • 1,860 Thanks
    ValiantSon
    Hello,

    My fiance and I are setting aside money each month to overpay the mortgage, currently £100.00 a month.

    The idea is to save the £100.00 a month up until our first mortgage term is over (August 2022), then remortgage with the money saved as another "deposit" to reduce the term of the mortgage.

    We're currently saving it in premium bonds, just so that it's set aside from the rest of our money and there's the, albeit minuscule, chance of winning the million.

    There's a lingering feeling in the back of my mind that saving the overpayments in premium bonds isn't the best idea, as of course it earns no interest and the chances of winning anything are slim.
    Originally posted by Drucifer
    You have that lingering feeling because premium bonds are an almost completely pointless product for the vast majority of people in this country. You earn no interest and, as you have said, have only an infinitesimally small chance of winning £1 million. The chances of you winning enough to break even compared to a normal easy access savings account are also stacked against you.

    Premium bonds are rubbish.

    I've considered investing it, (I'm already investing separately for retirement), but with less than 5 years I'm not 100% sure on this idea either, as it could drop a lot in value when I need it & I'm not sure what level of risk is advised for a 5 year time frame with money I will need.
    Originally posted by Drucifer
    Five years is too short to be looking at an investment. There is a very high chance that your investments will have lost significant value over such a short timeframe.

    Or should I just phone up the lender and overpay the mortgage each time there's enough money to cover another payment?
    Originally posted by Drucifer
    This would save you more in interest than just paying a chunk off at the end of your fix. Double-check how much you are allowed to overpay each year (often it is no more than 10% of the outstanding value).
    • ValiantSon
    • By ValiantSon 4th Feb 18, 6:28 PM
    • 2,013 Posts
    • 1,860 Thanks
    ValiantSon
    Have you not considered saving your extras in cash accounts? 3-5% interest accounts available from various providers with instant access if required. Or at least filling up the larger paying ones before heading towards the PB. I like the idea of the 'in it to win it' with premium bonds, but would be disappointed with no returns at all that could have been in a cash account.
    Originally posted by AlexTheLion
    Buy a lottery ticket then. You have a 1 in 97 chance of winning £25. The chance of winning the same amount with one premium bond is 1 in 24,500.

    The only advantage is that your stake is protected, but then that is £100 not earning any interest, whereas you could save £98 in an interest bearing account and buy a lottery ticket.
    Last edited by ValiantSon; 04-02-2018 at 6:36 PM. Reason: Formatting
    • ValiantSon
    • By ValiantSon 4th Feb 18, 6:30 PM
    • 2,013 Posts
    • 1,860 Thanks
    ValiantSon
    Thank you for your input.

    I did briefly consider saving it in a cash account, I've already got many accounts each with a specific purpose and to my knowledge, though could be wrong, I'd need a particular amount of Direct Debits to pay out or a certain amount to pay in to qualify for interest, just too much juggling around for my liking and extra things to track, and I prefer my Direct Debits to be at an absolute minimum.

    So not my first choice, but can be done if this is the best option.
    Originally posted by Drucifer
    If you really can't manage to organise a higher paying current account then you could always open an easy access savings account where there are no DD requirements.

    Another, and more sensible option would be a regular saver paying 5% from one of the following: Santander; Nationwide; M&S; First Direct: HSBC.
    • ValiantSon
    • By ValiantSon 4th Feb 18, 6:32 PM
    • 2,013 Posts
    • 1,860 Thanks
    ValiantSon
    Personally I would invest it. My thoughts are that you could easily make 10% a year on it. Minimum. But that’s just my attitude to risk - assuming 3 year minimum period.

    Premium bonds wouldn’t be on my radar as an option.
    Originally posted by bertpalmer
    Ignore this!

    A three year minimum period for an investment is way too short. I doubt if you would find any IFA who advised you to do this (and if you could then you would be able to sue them when your investment had lost value three years later).
    • Drucifer
    • By Drucifer 18th Feb 18, 8:50 PM
    • 19 Posts
    • 16 Thanks
    Drucifer
    Thanks Everyone for the responses.

    ValiantSon, you've convinced me here, and on seeing many other of your posts elsewhere, that PB's are a waste of time, so I phoned up my mortgage lender today and got their sort code and account number, I've also cashed out the PB's and will be transferring the money by bank transfer to the lender, from now on the money will be sent straight to them too, I've to phone them tomorrow again though to make sure the payments are used to reduce the term of the mortgage. Sound sensible?
    • Peelerfart
    • By Peelerfart 18th Feb 18, 9:23 PM
    • 1,915 Posts
    • 1,674 Thanks
    Peelerfart
    Personally I would invest it. My thoughts are that you could easily make 10% a year on it. Minimum..
    Originally posted by bertpalmer
    Oh please share this, minimum 10% site/Investment with us, please
    Space available for rent
    • ValiantSon
    • By ValiantSon 18th Feb 18, 9:54 PM
    • 2,013 Posts
    • 1,860 Thanks
    ValiantSon
    Thanks Everyone for the responses.

    ValiantSon, you've convinced me here, and on seeing many other of your posts elsewhere, that PB's are a waste of time, so I phoned up my mortgage lender today and got their sort code and account number, I've also cashed out the PB's and will be transferring the money by bank transfer to the lender, from now on the money will be sent straight to them too, I've to phone them tomorrow again though to make sure the payments are used to reduce the term of the mortgage. Sound sensible?
    Originally posted by Drucifer
    Assuming that your mortgage interest rate is higher than you can earn on interest from savings, then yes. Even if you could get a higher interest rate in the savings it's worth keeping in mind the potential income tax (if you exceed the £1000 / £500 allowance), which would eat into the return.

    There is also a significant psychological gain from paying off the mortgage sooner, and this does sometimes get overlooked. Once the mortgage is clear you will have more cash to turn towards other investments.

    At least I've managed to persuade one person about premium bonds!
    • Drucifer
    • By Drucifer 18th Feb 18, 10:29 PM
    • 19 Posts
    • 16 Thanks
    Drucifer
    Assuming that your mortgage interest rate is higher than you can earn on interest from savings, then yes. Even if you could get a higher interest rate in the savings it's worth keeping in mind the potential income tax (if you exceed the £1000 / £500 allowance), which would eat into the return.

    There is also a significant psychological gain from paying off the mortgage sooner, and this does sometimes get overlooked. Once the mortgage is clear you will have more cash to turn towards other investments.

    At least I've managed to persuade one person about premium bonds!
    Originally posted by ValiantSon
    I'm always trying to make the best decisions financially so I really do appreciate the advice, after I thought about what you've said in your posts it does make sense avoiding PB's, so far they've earned us nothing and has provided no real benefit to us, the money has just sat there, but actually using it to reduce the term of the mortgage has a real benefit, it guarantees paying less interest over all and reducing the term of the mortgage over all, that sounds good to me.

    I keep enough cash to cover day to day expenses and to cover the bills of course, I set aside small sums of money to enjoy freely and I have my 6 month emergency fund which earns 3%... right off the bat I know that I could move this emergency fund to Nationwide and get 5% on it, which I should probably hurry up and do. I've also my 2 retirement vehicles....so I think I'm making good decisions thus far
    • ValiantSon
    • By ValiantSon 18th Feb 18, 10:37 PM
    • 2,013 Posts
    • 1,860 Thanks
    ValiantSon
    I'm always trying to make the best decisions financially so I really do appreciate the advice, after I thought about what you've said in your posts it does make sense avoiding PB's, so far they've earned us nothing and has provided no real benefit to us, the money has just sat there, but actually using it to reduce the term of the mortgage has a real benefit, it guarantees paying less interest over all and reducing the term of the mortgage over all, that sounds good to me.

    I keep enough cash to cover day to day expenses and to cover the bills of course, I set aside small sums of money to enjoy freely and I have my 6 month emergency fund which earns 3%... right off the bat I know that I could move this emergency fund to Nationwide and get 5% on it, which I should probably hurry up and do. I've also my 2 retirement vehicles....so I think I'm making good decisions thus far
    Originally posted by Drucifer
    It sounds like you are in a good position.

    I'd agree about moving £2500 to Nationwide FlexDirect to get 5%, but don't forget to move it away again after 12 months because the rate will drop to 1%. You'll also get access to the 5% regular saver (£250 p/m) so cycle some money in there too, if you can. If you know anyone with a Nationwide account then it's worth asking them to recommend you so that you both get a £100 bonus.
    • Drucifer
    • By Drucifer 18th Feb 18, 10:50 PM
    • 19 Posts
    • 16 Thanks
    Drucifer
    It sounds like you are in a good position.

    I'd agree about moving £2500 to Nationwide FlexDirect to get 5%, but don't forget to move it away again after 12 months because the rate will drop to 1%. You'll also get access to the 5% regular saver (£250 p/m) so cycle some money in there too, if you can. If you know anyone with a Nationwide account then it's worth asking them to recommend you so that you both get a £100 bonus.
    Originally posted by ValiantSon
    I could cycle the £250p/m to the regular saver, but I'd have to sacrifice my contributions to the Vanguard ISA, would it make more sense to guarantee the 5% on £250 p/m or continue investing with Vanguard?
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