Soldato
It's usually 10% of the balance at the beginning of the financial year. That's how ours is. I have 19k left to pay, so I can overpay 1.9k this year without incurring ERC of 3%.
Mortgage Rate Rises
- Thread starter glenimp617
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People being stung by big jumps in interest rates on their mortgages probably made overpaying more comforting! Or personal savings allowance and getting taxed on interest given that it is much more likely now that savings rates are more appealing (assuming outside of an appropriate tax wrapper)!
Seeing outstanding payment duration on the mortgage drop from 20+ years to much less is always nice too
Soldato
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- 21 Sep 2020
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Right, I’ve looked it up it looks like they don’t really allow it. So £5k over 11.5 years is nothing. Pay as much as you can now and it’ll reduce your overall interest.
Personally I wouldn’t bother as you’ll earn more saving it.
Normally even paying £200 p/m extra over 13 years would say you about £5.5k in interest and would get you finished in 10 years.
Personally I wouldn’t bother as you’ll earn more saving it.
Normally even paying £200 p/m extra over 13 years would say you about £5.5k in interest and would get you finished in 10 years.
Personally, if I was keen to pay off my mortgage quickly I'd stick xK into a fixed bond and just dump it into the mortgage at renewal when no ercs are applicable.People being stung by big jumps in interest rates on their mortgages probably made overpaying more comforting! Or personal savings allowance and getting taxed on interest given that it is much more likely now that savings rates are more appealing (assuming outside of an appropriate tax wrapper)!
Seeing outstanding payment duration on the mortgage drop from 20+ years to much less is always nice too
Obviously that depends on your mortgage being lower than best fixes around.
Associate
I just called them back. I can overpay 10% of the original amount borrowed (£85K so £8,500) each year.
Soldato
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lol
Soldato
Why did we overpay
A/ wanted our names on the deeds not the Nationwide
B/ no fees for overpayment
C/ we were on child tax credits Savings would have lost us well in excess of 5k a year add in uni grants, kids ema when it was a thing we are talking a lot more
D/ no temptation to spend as it's locked up in equity
E/ we knew on sale after the 9 years it took to pay it off it was all ours and the plan to move somewhere nice was game on
A/ wanted our names on the deeds not the Nationwide
B/ no fees for overpayment
C/ we were on child tax credits Savings would have lost us well in excess of 5k a year add in uni grants, kids ema when it was a thing we are talking a lot more
D/ no temptation to spend as it's locked up in equity
E/ we knew on sale after the 9 years it took to pay it off it was all ours and the plan to move somewhere nice was game on
it would be 10% of what is left over come the start of the year. Not 10% of the original amount. Unless they have some weird rule no one else does.
Last year I had £38k at the start of my mortgage. I paid £3800 overpayment.
This year it was down to £32k or so. I could only pay £3200.
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Soldato
25k left here on mine, 4.95% I get charged 5% on over payment amount currently as I'm outside my fee free allowance now which nets saving down to around 4% (equal saver almost)
Hacking at it absolutely wherever possible, mainly because it removes any temptation of cash being sat in savings and buying unnecessary crap, this for me is reason enough now.
Hacking at it absolutely wherever possible, mainly because it removes any temptation of cash being sat in savings and buying unnecessary crap, this for me is reason enough now.
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Soldato
Not worth thinking about for the amounts involved. May as well invest your money instead.
Soldato
If we had done that I wouldn't be in Cornwall but it's definitely down to individual circumstances., mine was ridiculously easy to decide on overpay
You're welcome
If your interested is calculated daily on the mortgage then overpaying every month would be more beneficial than waiting to put a lump sum in, surely.
I still don't buy the idea that saving to pay off in a lump sum is better than overpaying every month. Let's say your mortgage is £300k borrowed, and you're paying say 3% on that. That's 3% on 300k. If you start saving with an interest rate of, say 5% you're not getting 5% interest on 300k are you. You're getting 5% on, say the £2500 you just put in.
Either way I'd prefer to hit it at source and not have to manage another savings account, and not be tempted to spend it at a later date.
I still don't buy the idea that saving to pay off in a lump sum is better than overpaying every month. Let's say your mortgage is £300k borrowed, and you're paying say 3% on that. That's 3% on 300k. If you start saving with an interest rate of, say 5% you're not getting 5% interest on 300k are you. You're getting 5% on, say the £2500 you just put in.
Either way I'd prefer to hit it at source and not have to manage another savings account, and not be tempted to spend it at a later date.
No, it would be better to earn 5% on the overpayment, except in a scenario where you don't have any savings allowances e.g additional rate taxpayers.
You are arguing maths?
So you're comparing the percentages only on the overpayment amount? But is interest calculated daily on mortgages and savings? If interest is calculated daily on your mortgage, but only paid yearly one your savings account, what does that mean.
Yup. Somebody needs to do an actual example with some simple numbers. Because I still don't get it.
e.g. 250k mortgage. Can save or overpay £500/month. No existing savings. Savings rate 5%, mortgage rate 2%.
Go nuts.
Man of Honour
Mortgage Overpayment Calculator: Pay off your debt early?...
Mortgage Overpayment Calculator shows how much you can save by paying off your mortgage early - if your mortgage allows overpayments.
www.moneysavingexpert.com
with your example (assuming 25 year mortgage & no tax on savings):
"
You would be £32,100 better off if you saved at 5% rather than overpaying the mortgage for the 15 years and 7 months it'd take.
This is because if you saved the money, after this time you would still have £109,620 to pay off to clear the mortgage, but you'd have £141,720 in savings, more than enough to clear the balance and still have £32,100 left over (this doesn't include any early repayment fees charged by your lender). Whereas if you had overpaid the mortgage you'd be mortgage free but wouldn't have anything left over"
It also gives you more flexibility in the future - assuming your not on a 25 year fixed every time your mortgage is up for renewal you can pay off as much as you like without penalty allowing you to make a decision at that point if you want to pay off a lump for a better loan to value rate, or keep saving.
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Interest is always daily. So it's better to do it as close to the start of the year as possible for mortgage if going down that route.
Its 2% on the full amount though not just the overpayment. That's like £5000 (not factoring in the amount lowering over the year) per year interest. No calculator I can find can take into account a consistent 10% overpayment each year.
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Interest is usually calculated daily, calculated is not the same as paid.