Overpaying Mortgage

dowie said:
my mortgage is < 2%

not overpaying it is a no brainer

some cash goes into savings, some into passive investments some into rather active investments

if I'd made overpayments on my mortgage rather than saving and investing it I'd lose out on thousands of £s, I'm not sure how setting up a savings account is 'hassle' if it is then I think you're doing it wrong
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There is another consideration, which depends on your employability.

If you have £excessive and need to claim benefits you may not get any.
Thats unless you are willing to try to hide them.

Your on the face of it taking a pretty balanced approach, but it definately depends on factors such as LTV for the OP who is potentially moving lender at some point.
 
dowie said:
my mortgage is < 2%

not overpaying it is a no brainer

some cash goes into savings, some into passive investments some into rather active investments

if I'd made overpayments on my mortgage rather than saving and investing it I'd lose out on thousands of £s, I'm not sure how setting up a savings account is 'hassle' if it is then I think you're doing it wrong
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Can you share details of these amazing savings accounts where you are getting such great interest rates that you are saving ££ even when factoring in the cost of interest on your mortgage, because that is some achievement.

Only savings products please as investments come with their own complications and risks that cannot be determined in full until the point of withdrawal.

Remember you are comparing interest earned on savings up to the total value of outstanding balance on your mortgage which you pay interest on.

Unless you have a small mortgage (sub 50K) its not easy to firstly build up the savings to earn the interest on to off set against the interest paid, so you are playing catch up on the interest paid since the start of the term.
 
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see money saving expert for plenty of savings accounts

and I'm not comparing with the total value of the outstanding balance of the mortgage as I don't have all my cash in savings either but other investments too as already mentioned in the post you're quoting but it is generally a good idea to have a few months worth of expenses in cash

in the case of the savings having a few thousand set aside is pretty much a no brainier compared with paying down the mortgage by that same amount given the interest rates for both
 
dowie said:
there are more things to put your money into than just savings accounts, especially when you're young so no, that isn't exactly why you should overpay

also for savings there are plenty of accounts out there paying interest > a regular mortgage with reasonable equity
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Such as where?
What would you stick 10L or 20K or 40K into as an investment vehicle currently with low/zero risk?
 
I wouldn't stick 40k in cash

I've got between 14-17k at any time in a Santander 123 account, which I might need to change as of November
 
Obviously at less than 2% it's not worth overpaying so long as you don't spend the cash you would use to overpay.

However now many people I imagine have less than 2% interest rate especially if they are young first time buyers. OP I can imagine has nowhere near less than 2% due to the fact it's a 30 year deal he is on. He will be 3%+ I imagine as he probably isn't with a very good lender.

Also all these accounts your talking about on MSE have restrictions. You need to have 2 direct debits, pay in X amount, etc, etc.

Like I say my 5% account only lets me pay in £500 a month. My other account which pays 3% only on the first £2500 of the balance. Other account with M&S pays a £100 bonus then £10 per month for the first year.

After that it starts to get tedious should I open yet another bank account to gain 0.16% more than overpaying my mortgage? Which will then require direct debits coming out of it, etc. Simply not worth it for an extra 0.16% more than what I save. My interest rate is 2.84% on the mortgage FYI.

So I overpay, then when my deal expires I'll get a much better deal which will save me more than 0.16% I imagine, which will then mean yes in future I'll be better off not overpaying but currently doesn't make much sense other than what i already have set up. Your lucky to have a less than 2% mortgage in your situation though I would re-mortgage and take all your savings and buy 2 flats with substantial deposits to rent out, use the rent as an income and pay the re-mortgage off.
 
If I want leveraged investments then there are far more liquid assets out there than housing, but I don't have any plans to be a BTL landlord with all the additional hassle that brings. I did have a decent deposit when I bought but I also remortgaged as I own a flat in London and it has increased in value considerably.
 
dowie said:
I wouldn't stick 40k in cash

I've got between 14-17k at any time in a Santander 123 account, which I might need to change as of November
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Yeah we have two santander accounts that are full, but really have no idea what to do with them after November. They'll probably go into the new house anyway if the boss has anything to do with it :/.
 
I'm glad in the US mortgages you can overpay as much as you want with zero charges. We overpay out mortgage by around 7x the actual base fee, and will cut our 30 year mortgage down to a mere 3 years!. Interest rate on the mortgage is well over 4%, savings and bonds are only around 0.1%, so absolutely zero point in saving penny. But we do try to max out our pension contribution to avoid tax.


A few more months and we'll be mortgage free. then we either have to think about buying a bigger house or a chalet in the mountains. America makes life real easy if your family has 2 professional salaries.
 
D.P. said:
I'm glad in the US mortgages you can overpay as much as you want with zero charges. We overpay out mortgage by around 7x the actual base fee, and will cut our 30 year mortgage down to a mere 3 years!. Interest rate on the mortgage is well over 4%, savings and bonds are only around 0.1%, so absolutely zero point in saving penny. But we do try to max out our pension contribution to avoid tax.


A few more months and we'll be mortgage free. then we either have to think about buying a bigger house or a chalet in the mountains. America makes life real easy if your family has 2 professional salaries.
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You can on loads of products here too, it tends to be the fixed and discounted promotional rates which have these overpayment limit clauses. :)

Is 4% considered an OK rate over there by the way? That would be a huge rate for the UK :eek:
 
I've been overpaying mine and no fee's, until I overpay over £10k in 1 year period. But I'm only throwing in £300-£400 extra per month on mine.
 
Jez said:
You can on loads of products here too, it tends to be the fixed and discounted promotional rates which have these overpayment limit clauses. :)

Is 4% considered an OK rate over there by the way? That would be a huge rate for the UK :eek:
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What are you talking about?
A high rate?
Not it isn't.
Its below most big banks standard variable rates.

It is only short term deals, which often have an arrangement fee attached that are lower.

Our BoE interest rate might be 0.25% but
Halifax standard variable rate (SVR) 3.99%.
Nationwide Building Society SVR 3.99%.
First Direct SVR 3.69%.
Natwest SVR 4.00%.
HSBC SVR 3.94% (this does not track the BOE base rate).
Barclays SVR 4.99%
Santander SVR 4.24%.
Skipton SVR 4.95%

Those are our bank 'rates'.
 
Hikari Kisugi said:
What are you talking about?
A high rate?
Not it isn't.
Its below most big banks standard variable rates.

It is only short term deals, which often have an arrangement fee attached that are lower.

Our BoE interest rate might be 0.25% but
Halifax standard variable rate (SVR) 3.99%.
Nationwide Building Society SVR 3.99%.
First Direct SVR 3.69%.
Natwest SVR 4.00%.
HSBC SVR 3.94% (this does not track the BOE base rate).
Barclays SVR 4.99%
Santander SVR 4.24%.
Skipton SVR 4.95%

Those are our bank 'rates'.
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Dunno. You can get a lifetime tracker at 1.49% over BOE from HSBC (60% LTV), £750 fee

Or a 10-year fix at 2.79% (70% LTV). Fee free.
 
Hikari Kisugi said:
What are you talking about?
A high rate?
Not it isn't.
Its below most big banks standard variable rates.

It is only short term deals, which often have an arrangement fee attached that are lower.

Our BoE interest rate might be 0.25% but
Halifax standard variable rate (SVR) 3.99%.
Nationwide Building Society SVR 3.99%.
First Direct SVR 3.69%.
Natwest SVR 4.00%.
HSBC SVR 3.94% (this does not track the BOE base rate).
Barclays SVR 4.99%
Santander SVR 4.24%.
Skipton SVR 4.95%

Those are our bank 'rates'.
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I really hope you haven't got a mortgage and if you do get one you get some proper advice.

The SVR is the default rate for people who are lazy/disorganised or just like setting money on fire and so don't remortgage when their deal ends.

There are plenty of fixed rate deals and trackers out there that will beat it and no they're not all for a limited time either - check out first direct and their lifetime trackers or HSBC, or Santander etc..etc..
 
dowie said:
The SVR is the default rate for people who are lazy/disorganised or just like setting money on fire and so don't remortgage when their deal ends.
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Or you just have a good SVR :p

There are plenty of fixed rate deals and trackers out there that will beat it and no they're not all for a limited time either - check out first direct and their lifetime trackers or HSBC, or Santander etc..etc..
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My fixed rate was done pre-2008 crash, and had a default SVR of 1.99% above base (back when we had interest rates!), which coincidentally matches that First Direct lifetime tracker (with 60% LTV) you mentioned, which with £0 arrangement and booking fee is a damn good deal.

When my fixed lapsed after the crash I left it on SVR and have been on 2.49% (now 2.24%) since
 
nah first direct tracker is 1.49 above base (edit or at least it was previously... looks like they've stuck their prices up since then)

though 1.99 matches the Santander tracker IIRC

tis a bit moot though as at the time they were around there were better deals on mortgages anyway... including sub base rate tracker deals etc.. so the SVR was still naff
 
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Jez said:
You can on loads of products here too, it tends to be the fixed and discounted promotional rates which have these overpayment limit clauses. :)

Is 4% considered an OK rate over there by the way? That would be a huge rate for the UK :eek:
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Remember most mortgages in the US are 15 or 30 year fixed rates.

Having said that 15 year fixes are hovering around 2.75% at the moment and 30 year fixes are at about 3.2%.
 
dowie said:
I really hope you haven't got a mortgage and if you do get one you get some proper advice.

The SVR is the default rate for people who are lazy/disorganised or just like setting money on fire and so don't remortgage when their deal ends.

There are plenty of fixed rate deals and trackers out there that will beat it and no they're not all for a limited time either - check out first direct and their lifetime trackers or HSBC, or Santander etc..etc..
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I have a mortgage, I am at 0.39 tracking over base life term. It is a decent product.
There are plenty of deals, but the chap stated that 4% was a high mortgage, it isn't for a mortgage you can overpay as much as you like all the time. Few UK mortgages allow that unless you are on SVR, and SVRs are what I stated, all around 4% above and below. I assume the US 4% deal is virtually the same, and could find lower products that are somewhat more restrictive.
That was my point.
 
Hikari Kisugi said:
I have a mortgage, I am at 0.39 tracking over base life term. It is a decent product.
There are plenty of deals, but the chap stated that 4% was a high mortgage, it isn't for a mortgage you can overpay as much as you like all the time. Few UK mortgages allow that unless you are on SVR, and SVRs are what I stated, all around 4% above and below. I assume the US 4% deal is virtually the same, and could find lower products that are somewhat more restrictive.
That was my point.
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Yet there are various lifetime trackers that allow that, not to mention you're free to save and then pay off a fixed rate deal at the end of the three years for the same effect (or marginally better even if you're getting a better rate on your savings)

4% is very high for a UK mortgage if you've got reasonable equity and looking at SVR rates is a bit silly
 
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