Mortgage Rate Rises

[DJMK4]

Contemplating making my first mortgage overpayment end of this month, as i need to try and make 4 months of overpayments by april, - and i would need to make approx £3k overpayment end of this month

Really not sure if i should just do a bigger than normal payment, or do £2k per month for a few months and stick the remainder in savings

 

[matt100]

Contemplating making my first mortgage overpayment end of this month, as i need to try and make 4 months of overpayments by april, - and i would need to make approx £3k overpayment end of this month

Really not sure if i should just do a bigger than normal payment, or do £2k per month for a few months and stick the remainder in savings

Why do you "need" to?

 

[413x]

i would contribute extra to the pension as that's 40% relief, yes you'll have less take home pay but looking long-term, that's an easy win right there

Absolutely this.

You're gaining 40pc.

When it comes to take your pension you can take the 25pc tax free and just bop the mortgage on the head then.

I'm not overpaying mortgage at all.
Because it's a great rate on a loan.

 

[413x]

Why do you "need" to?

I think for many people it's purely phycology.

People see that big number and what seems like a big monthly payment and just want it gone. But it's rarely the best thing to do.

Especially if you are 40pc tax rate payer.

 

[DJMK4]

Why do you "need" to?

Because, i want to get my mortage down a little bit and cut down some of the interest, if i can make 2-3 years of overpaying by around £10k per year, this would help


I dont have a crystal ball on what will happen with work roles, and i feel that i am lagging behind a little bit when you read people who are overpaying


I am on my own, and i still have a 22.10year mortgage term when im 41 this year

I have savings behind but, but i have never overpayed on my mortgage yet

 

[Liquid_Entity]

haha I am 47 and have 27.5 yrs left on my mortgage. You're fine haha

 

[413x]

Because, i want to get my mortage down a little bit and cut down some of the interest, if i can make 2-3 years of overpaying by around £10k per year, this would help


I dont have a crystal ball on what will happen with work roles, and i feel that i am lagging behind a little bit when you read people who are overpaying


I am on my own, and i still have a 22.10year mortgage term when im 41 this year

I have savings behind but, but i have never overpayed on my mortgage yet

If you have 22 years left and are 41 you could definitely make use of the pension method + tax free lump sum on draw down.

I'm 39 and have 187k on our (me+gf).

Again, not overpaying as the loan rate is so good vs pension contributions.

 

[DJMK4]

If you have 22 years left and are 41 you could definitely make use of the pension method + tax free lump sum on draw down.

I'm 39 and have 187k on our (me+gf).

Again, not overpaying as the loan rate is so good vs pension contributions.

Whats your mortage rate?

 

[DJMK4]

haha I am 47 and have 27.5 yrs left on my mortgage. You're fine haha

Where are you based in the UK ? are there plenty of jobs in your area?

I have anxiety about what will happen in the future, if i have to work further afield etc

I generally also find its probably easier for people who are in a couple, as you have a backstop should one of you need to find work.

 

[matt100]

Because, i want to get my mortage down a little bit and cut down some of the interest, if i can make 2-3 years of overpaying by around £10k per year, this would help


I dont have a crystal ball on what will happen with work roles, and i feel that i am lagging behind a little bit when you read people who are overpaying


I am on my own, and i still have a 22.10year mortgage term when im 41 this year

I have savings behind but, but i have never overpayed on my mortgage yet

That doesn't explain why you "need" to do anything.

"want" I totally understand but you said "need" and then went on to give numbers like you had a specific thing that you needed to hit to get to an LTV or something.

 

[Liquid_Entity]

Where are you based in the UK ? are there plenty of jobs in your area?

I have anxiety about what will happen in the future, if i have to work further afield etc

I generally also find its probably easier for people who are in a couple, as you have a backstop should one of you need to find work.

Eastbourne, no jobs here would pay my salary. I commute to Croydon twice a week.
Separated from wife, 2 kids (5 and 9) and coparent 50% of the week
This is my own mortgage on a 2 bed maisonette.
I'm overpaying here and there nothing more than £100 to £150 a month which will not mean much but I need to get that LTV rate down once the 5yr deal ends in 2.5yrs.

 

[DJMK4]

That doesn't explain why you "need" to do anything.

"want" I totally understand but you said "need" and then went on to give numbers like you had a specific thing that you needed to hit to get to an LTV or something.

Because i want to get the balance down a bit, its thats simply really,

the longer i leave it, the more interest i will be paying?

Also, there could potentially be something that will be changing in my current workplace (beyond my control) in a couple of years

 

[silversurfer]

Low LTV could add security by allowing more deals like fixing a rate for 10 years then you have certainty and if this gets you to sleep easier I dont find its reasonable to argue against.

Mortgages are a standing liability, overpaying is better then what the majority do which is spend it and put minimums towards bills. Divide your mortgage rate by the tax rate you pay and then compare it to savings as savings are taxable.

so 6% / 0.6 for 40% tax is equal to 10% savings ignoring also the compound gain.

1.06%^years left on mortgage=compound gain over term
20 years left would make overpay £1000 at 6% compound to £2207 interest & £1000 capital saved off the cost of the whole term billed.

I favour the sipp idea in theory but at more risk and also more performance if done right, just put into FTSE I agree it would outperform 90% likely. Do a bit of both maybe but low LTV is nice place to be imo

 

[Maccy]

Because i want to get the balance down a bit, its thats simply really,

the longer i leave it, the more interest i will be paying?

Also, there could potentially be something that will be changing in my current workplace (beyond my control) in a couple of years

Yeh, but its not a need is it - you've said yourself it's a want!

I've have over 32 years left on mine with £285k remaining and I'm 40 in a few years, and I don't "need" to make overpayments.

 

[413x]

Whats your mortage rate?

1.9
But even i if it was 5 or 6 percent I wouldn't be doing anything different.

The saving on pension is multiples of this.
And returns on stocks is higher too.

Way I see it.. Overpaying pension overpaying house is basically same... Locking money away for long term. Neither is easily accessible.

So I may as well put it in the best investment vehicle. Which is pension.

 

[413x]

Because i want to get the balance down a bit, its thats simply really,

the longer i leave it, the more interest i will be paying?

Also, there could potentially be something that will be changing in my current workplace (beyond my control) in a couple of years

This bit is pure feeling.
Not picking at it or anything. A lot of people have the same. But it's literally emotional.

I treat assets and debt broadly as one big pot.
It doesn't matter if cash is in pension, or house or isa etc. I just want to put it where it will perform the best.

If you're not higher rate is more nuanced. But if you're in 40pc, and you're deciding to put cash somewhere long term.. It's nearly impossible to beat pension.

 

[DJMK4]

1.9
But even i if it was 5 or 6 percent I wouldn't be doing anything different.

The saving on pension is multiples of this.
And returns on stocks is higher too.

Way I see it.. Overpaying pension overpaying house is basically same... Locking money away for long term. Neither is easily accessible.

So I may as well put it in the best investment vehicle. Which is pension.

Understood


mine is 3.95%

However, i feel a little uncomfortable with not having the ability to pay down the mortage until my pension is released

 

[413x]

Understood


mine is 3.95%

However, i feel a little uncomfortable with not having the ability to pay down the mortage until my pension is released

You should do what's right for you for sure. Just make sure it's not feeling you're going on I guess I'd say.

Not sure when get access to that lump sum. But I certainly intend to max it out when it comes

 

[DJMK4]

You should do what's right for you for sure. Just make sure it's not feeling you're going on I guess I'd say.

Not sure when get access to that lump sum. But I certainly intend to max it out when it comes

I also hate the feeling of having to give up a lump sum like that,

IE if i had the ability to release 50k from a pension, i wouldnt want it just going as a repayment and seeing it just all go like that


I struggled when i had to pay £17k for a car out of my own pocket even though i could easily afford it. It hurt

 

[413x]

I also hate the feeling of having to give up a lump sum like that,

IE if i had the ability to release 50k from a pension, i wouldnt want it just going as a repayment and seeing it just all go like that


I struggled when i had to pay £17k for a car out of my own pocket even though i could easily afford it. It hurt

Again this is feeling. And absolutely if it's a struggle there's a lot to be said for peace of mind.

But mathematically, It isn't really any difference to paying that overpayment month on month.

But yes. It's quite common people struggle with it.


As a similar, smaller, example I pay 400ppm into my regular saver (6.25pc)at the end of the year I will have about 5k in there. At the end of the term I will just drop the entire thing into paying off 0pc credit card I took out to pay for my years holidays.

That way I'm earning 6pc on the money I use for my yearly holidays. I like to do this every year. But I will dump the entire savings amount onto that credit card. Just because it's a large number means nothing to me. It's just in a big pot of cash vs debt that's allocated to me

But I have always been very emotionally detached from money stuff.