What % of your income do you pay on mortgage?

19% currently while the missus takes a year off with the baby, will drop to half that when she goes back to work.

That doesn't factor in over-payments though and we overpay around 25% every month at the minute, plus make lump sum payments (last one was about 9% of the total).
 
rossk26 said:
Any spare cash you have is better off used to overpay the mortgage rather than save.
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Not always.

Some people have been or are likely to be caught out if, sorry, when interest rates go up. The small print on a mortgage could mean the rate rise could be applied even to the overpayment depending on your terms and conditions.

Was in the times money supplement last week
 
TripleT said:
14% of joint net pay.

Used to overpay but my wife has gone back to work after having a baby and dropped a day. Also nursery fee's are eye watering, they're actually more than my mortgage per month for just 3 days a week! :eek:



I know you probably won't do that but I'll say it anyway. All well and good until interest rates shoot up and you're homeless :p Always leave wiggle room.
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yeah, our child care will be more than our mortgage
 
rossk26 said:
Any spare cash you have is better off used to overpay the mortgage rather than save.
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No, as long as you can get a rate of return higher than the interest rate then it is the last thing you should be doing.

First thing to do will be to max out any pensions and ISAs. If after that you still have spare cash then you might want to consider a balanced financial approach which might include mortgage overpayment but also investments. With interest rates so low there is little need to overpay your mortgage right now, you can be much better off financially by investing your money elsewhere. If rates increase then it might be wise to shift investments into refinancing mortgage.
 
NoNameNoNumber said:
I'm new to mortgages... Bought our first house about 6 months ago :)

I have a bit of spare cash each month I've been thinking of investing, this last week some old bat mentioned overpayments on a mortgage...

Just had a quick look online. here and it would suggest that my ~£110000 @ ~4.5% over 25 years would be reduced by 9 years and 1 months with a saving of £30k! with a £200 a month overpayment...

Does that sound right?!
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yes, but in that same time if you put that same amount of money into an investment tool that returned marginally more than your mortgage rate, say 5%, then you will have 45K so will be 15K gross better off. If you can get a sustained rate of return at 8% you would be at 55K.
 
D.P. said:
No, as long as you can get a rate of return higher than the interest rate then it is the last thing you should be doing.

First thing to do will be to max out any pensions and ISAs. If after that you still have spare cash then you might want to consider a balanced financial approach which might include mortgage overpayment but also investments. With interest rates so low there is little need to overpay your mortgage right now, you can be much better off financially by investing your money elsewhere. If rates increase then it might be wise to shift investments into refinancing mortgage.
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What ISAs will beat mortgage rates?
 
rossk26 said:
What ISAs will beat mortgage rates?
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As far as I know at the moment, none. The point is that if/when rates increase you will have a large amount of tax free savings, something you can't do in a hurry due to the fact that you can only deposit the set allowance in any given tax year.
 
Zefan said:
As far as I know at the moment, none. The point is that if/when rates increase you will have a large amount of tax free savings, something you can't do in a hurry due to the fact that you can only deposit the set allowance in any given tax year.
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I've worked out that an overpayment of £50 a month would reduce my mortgage term by 4 years and save £8,734 in interest.

£50 invested in an ISA over the same term would result in £3,186 interest earned.

So unless you can get an ISA rate far greater than your mortgage rate, it's always far better to pay off the mortgage first.
 
rossk26 said:
What ISAs will beat mortgage rates?
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Stocks and shares ISAs. A rough rule of thumb is an average long term annual return of 7%.
The important point is this gives you tax free savings.

The Pension is a clear winner:
1) You have 10K gross annual you could use for mortgage overpayment, so before you even have that money it is down to 6K (assuming tax at top band).
You then save the 4.5% (or whatever mortgage rate) on this 6K.

2)If your employer does a pension match then that 10K gross could become 20K and isn't taxed at source. You can then hope to get a 7% return on average per year (potentially much more but with risk). Even if it was just shoved in some bonds at 2-3% since you are looking at compound interest on 20K vs 6K you will be much better off by retirement age.


The ISAs are very valuable in the future if you have a change of circumstances (you or partner loose a job, illness, interest rate rise, child, house need major repair or extension).




Other things to note- always pay off loans and credit cards that have a higher interest rate than your mortgage.


If you have a bit of capital then even a fixed bond can be better (the best bonds are returning more than the tracking mortgages)
http://www.money.co.uk/mortgages.htm
http://www.money.co.uk/savings-accounts/fixed-rate-bonds.htm
 
Circa 25% atm before overpayments (which are on an adhoc, but almost monthly basis)

Had it as high as 35% for 5 years when I was studying in my spare time... Wasnt spending any cash (as no spare time) so figured why not.. Was hard work but really got me ahead of the curve.. Should have no Mortgage before I am 40!!
 
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