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  • FIRST POST
    • Mr_Curious
    • By Mr_Curious 4th May 18, 6:53 AM
    • 103Posts
    • 49Thanks
    Mr_Curious
    Mortgage Overpayment Strategy?
    • #1
    • 4th May 18, 6:53 AM
    Mortgage Overpayment Strategy? 4th May 18 at 6:53 AM
    Hi Guys,

    What with so many different thoughts an opinions over a huge number of different form posts/blog style entries, I thought I'd try to get some concise ideas for over paying the mortgage. What strategy do you use? Do you 'sweep' certain amounts of 'change' to the mortgage on a daily/weekly basis? Do you work overtime/earn a bonus and pt all of this to the mortgage religiously? Do you make a set payment every month? And if so how did you get to that figure? Do you make an over payment to 'pay off' the added interest when indeed it is added?

    Clearly there are so many different options and opinions. What are your thoughts on things?
Page 2
    • kev2009
    • By kev2009 9th May 18, 8:48 PM
    • 285 Posts
    • 405 Thanks
    kev2009
    Also, does anyone know why Santander don't seem to have 60% LTV interest rate now? The lowest seems to be 75%...

    Kev
    • Kittenkirst
    • By Kittenkirst 10th May 18, 5:02 AM
    • 2,070 Posts
    • 11,321 Thanks
    Kittenkirst
    We employ similar tactics to others that have posted:

    1. Overpay a set amount monthly which rounds the mortgage payment up. When we first got the house we rounded up to the nearest £100 so OP'd £89.80 most months. As we've taken out a new deal early this year our rate dropped, therefore our payment dropped so we continue to 'top up' the monthly payment to the original we used to pay (so OP £212.45 but added another £100 as feels good for the monthly payment to be £1k!)
    2. TT's- I love tilly tidies and round down our bills account whenever it's at an odd number- this has hada great impact on our OPs
    3. Selling- we go though periods of car booting/ebaying/gumtreeing anything we don't want anymore and OP that
    4. Surveys- onepoll, Yougov, Pinecone, Prolific academy- again I go through periods of religiously doing these and then tail off at times but it does help
    5. Cashback sites when we remember! Quidco for online stuffs, Shopmium/ CheckoutSmart & ClickSnap with varying degrees of success- helps keep grocery costs down as well as yellow stickers giving more money in the bank available to OP
    6. Bonuses- my company doesn't allow overtime boooo and has massively decreased the value of my annual Bonus ( ) but whatever I get I try to OP just a small amount even if it's £30 it all will help

    Sorry if I've rambled but these techniques have meant we have overpaid £4300 since we bought our first home- a new build- in Oct 2016. I would never have dreamed we could overpay that or we would have 'spare' cash like that when we started our Mortgage (our budget looks pretty tight!) but it is all adding up slowly but surely
    2018 MFW #20 - OP £3846.60/ £3000 128%. Nov: £594.90

    Mortgage Oct '16 £170.995 LTV 90% end Nov 2041
    Overpayments 2016 £255.50 2017 £2600.40
    Referral codes= Prolific- 8JXN5BVG shopmium- ACEAHKFA Shoppix- 57VB13QH
    • Mr_Curious
    • By Mr_Curious 10th May 18, 11:48 AM
    • 103 Posts
    • 49 Thanks
    Mr_Curious
    I really like the idea of making over payments to bring the total outstanding to a rounder number. Very simple and very effective and mentally very rewarding to see the number dropping at easier to digest intervals
    • A Frayed Knot
    • By A Frayed Knot 10th May 18, 8:42 PM
    • 2,574 Posts
    • 11,350 Thanks
    A Frayed Knot
    I really like the idea of making over payments to bring the total outstanding to a rounder number. Very simple and very effective and mentally very rewarding to see the number dropping at easier to digest intervals
    Originally posted by Mr_Curious
    Exactly what I do, (its in my signature) I call them my Knotty o/payments I just keep making sure there is 0.00's at the end of my mortgage, and recently reached my 0,000.00 with a 1 on the front

    You said it "Very simple and very effective and mentally very rewarding to see the number dropping at easier to digest intervals"

    You'll be there in no time at all if you stick to this and all the other suggestions
    Always have 00.00 at the end of your mortgage and one day it will all be 0's
    Target 12 months 12/24 (missing out no.13)
    MFMarch 30 Re/M Oct 23 Target -Dec 19
    O/P's 2014/£4000, 2015/£6294.69, 2016/£3186.80, 2017 £4068.97

    • A Frayed Knot
    • By A Frayed Knot 10th May 18, 8:53 PM
    • 2,574 Posts
    • 11,350 Thanks
    A Frayed Knot
    . . . . . however I think I stretched too far as I'm now living on cheap meals with no slack to do anything

    . . . . I am having my doubts as to whether it was the right call though!
    Originally posted by Sir_Robin
    You can change your call.

    The beauty of overpayments is that they are your choice and that you don't have to keep to the set amount, they can change monthly, better to o/p manually that way you decide what you want/can afford to each month as long as you are strict with yourself.
    Always have 00.00 at the end of your mortgage and one day it will all be 0's
    Target 12 months 12/24 (missing out no.13)
    MFMarch 30 Re/M Oct 23 Target -Dec 19
    O/P's 2014/£4000, 2015/£6294.69, 2016/£3186.80, 2017 £4068.97

    • Mummy2cheekymonkeys
    • By Mummy2cheekymonkeys 12th May 18, 8:45 AM
    • 186 Posts
    • 1,306 Thanks
    Mummy2cheekymonkeys
    We have our mortgage with santander and I phoned them up to change the direct debit. Our monthly payments are 816 but we wanted to overpay 200 so they have set the direct debit to 1016. They asked when I phoned if we wanted to reduce the term or our monthly payments but keep the term the same. We wanted to reduce the term so our payments are kept the same. Also if you overpay this way and you use your 123 account you get cashback on the new amount so we now get £10 cashback as well. I have also set up online so that I can transfer money whenever I want as a faster payment. Santander were really helpful when I phoned them.
    • Schoolworker
    • By Schoolworker 12th May 18, 8:52 AM
    • 302 Posts
    • 648 Thanks
    Schoolworker
    Last year we increased our mortgage amount and term time out as we built an extension. I had been overpaying quite a bit every month previously but due to increased mortgage I am still overpaying but it's only £80 but I hope in several years time I will be able to reduce our mortgage term back down again. Also do Tilly tally and try to put a few more extra into it when I can. It good that I can see the amount decreasing online.
    • AnotherJoe
    • By AnotherJoe 12th May 18, 8:53 AM
    • 11,834 Posts
    • 13,782 Thanks
    AnotherJoe
    A problem with reducing the term may be that you are now locked into that and you may have issues if you wish to stop overpaying. Have you checked they will allow you to stop overpaying and revert to the original timescale?

    FWIW if you took the other option, you are still reducing the term as long as you adjust your overpayment upwards gradually to account for the fact that the required monthly payment is getting lower, but you then have the flexibility to adjust or stop your overpayment without needing to get permission
    • kev2009
    • By kev2009 12th May 18, 10:58 AM
    • 285 Posts
    • 405 Thanks
    kev2009
    I agree with AnotherJoe, the more I think about it, I think the best way is to reduce the Monthly payment rather than the term and then set the payment to be the same as you paid before - that way IF you ever need to , you can just pay the standard amount and not effectively a over payment each month.

    Does anyone know a good overpayment calcualtor that lets you specify mutiple overpayments as one off lump sums?

    I foudn this: https://www.landc.co.uk/calculators/mortgage-overpayment-calculator/ BUT unfortunately the graph doesn't seem to show what the value is clearly and no table to show the numbers so its a bit hard to tell.

    My spreadsheet says basically if i overpay 10% in 2019 and then keep my monthly payment the same figure as before the OP, I end up with more owing £60 more than if i overpay 10% in 2019 and then pay the lower monthly amount and then overpay 10% again 1 year later, doesn't seem right so need to find new calculator/spreadsheet.

    Kev
    • pavlovs_dog
    • By pavlovs_dog 12th May 18, 11:30 AM
    • 9,775 Posts
    • 23,855 Thanks
    pavlovs_dog
    I have 2 approaches to OPing, built in and ad hoc.

    Built in OPs are the ones that leave the account automatically. On our first mortgage, we rounded up and added a small amount. We have kept payments at this level ever since, even though we have since remortgaged and our contractual obligation has more than halved in this time.

    Every time I had a payrise, we added 90% of this to the OP standing order - you don't miss what you have never had, and it helped stop lifestyle inflation.

    When we remortgaged, we got a better rate. When our lender first tried to reduce our monthly payment, we asked for it to be kept at the rate we were initially paying. This is an additional £80+ towards the mortgage that we don't miss, on top of the £410 that is a static SO (meaning that the total leaving the account each month is always at least as high as our first ever mortgage payments).

    For ad hoc OPs, I TT and send any spare money towards the mortgage each month. The annual MFW challenges are very motivational to help with this. I know that to hit my target of OPing £6000 this year, I need to find £90 a month on top of my built in OPs.

    Another idea that has really helped is the 1% challenge, where you attempt to get together enough extra money to OP 1% of your debt. Focusing a number in the 00s or low 000s is much more achievable than trying to settle your entire mortgage. If you are not already in the habit of TTing this is a great way to establish the habit. It is also really motivating technique when you feel like you want to OP more but your budget won't really stretch to it.
    know thyself

    MFW 2018 #22 - £2180.08 /£6,000 (36%)
    MFi3 v4 #29 target £75,000

    Nid wy'n gofyn bywyd moethus...
    • AnotherJoe
    • By AnotherJoe 13th May 18, 5:40 PM
    • 11,834 Posts
    • 13,782 Thanks
    AnotherJoe
    There is an underlying potential opportunity being missed here which is that many people are passing up the chance of getting a lot of tax relief by paying at least some of these overpayments into a pension instead of a Mortgage.

    There are pros and cons of course but thinking that automatically overpaying all the spare cash you have is the best idea can cause you to potentially lose out on literally multiple tens of thousands especially if you are a high rate taxpayer.

    Simple example, you can get £1000 in your pension or pay £500 off your mortgage (as a high rate taxpayer). Also the chances are that inflation is whittling away your mortgage by 1% a year so paying it off early costs you double.
    • Mr_Curious
    • By Mr_Curious 20th May 18, 7:00 AM
    • 103 Posts
    • 49 Thanks
    Mr_Curious
    Just an update,


    I'll be making my first OP tomorrow and I'm quite excited to do so. My thought are to pay off at least the interest that has been added as well as keeping to the nearest £xxx,000.00, £xxx,250.00, £xxx,500.00 or £xxx,750.00.


    I understand what you are saying AnotherJoe regarding pensions. I am a lower rate tax payer. I contribute 10% as do my employers so I think that is covered for the time being. I may look to increase contributions in the future.
    • dannyboy2012
    • By dannyboy2012 20th May 18, 7:25 AM
    • 6 Posts
    • 2 Thanks
    dannyboy2012
    Hi - we make 2 O/P's - one on pay-day (26th) and another one just before the next payday (usually 24th). The first O/P is the minimum commitment we have made to overpaying the mortgage and the second payment is made to top up to what we consider optimal to keep us on track to be mortgage-free by Feb 2022. This just allows us a little extra flexibility should we have an unexpected cost going out. I hold the 'top-up' payment in a separate account so we don't 'accidentally' spend it.
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