Crazy they penalise people for overpaying. Just goes to show the bank's want us all under control.
Mortage questions
- Thread starter hornetstinger
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Worked out if I can pay off 10% remaning every year, on 20 year mortage, I'd pay it all off in 10 years, saving £19k in interest
after the first few years you will be able to pay off more than 10% (confirm with lender before paying off extra) usually (from what I have seen) the initial fixed periods (2 - 5 years) are the limited overpayment years.. both our mortgages were like that... after 3 years on 1 and 2 years on the other we would overpay what ever we wanted...
we recently used some of the overpayment reserve to pay for some building work... so a no hassle 2.4% loan...
Biggest deposit possible with the shortest mortgage, within reason.
Going on your figures, house is £125,000, £40,000 deposit and thusly a £85,000 mortage:
20 year mortgage £442 per month - £106,080.00 + £40k = £146,080.00
25 year mortgage £372 per month - £111,600.00 + £40k = £151,600.00
30 year mortgage £327 per month - £117,720.00 + £40k = £157,720.00 (The idea of paying an effective rate of 40% on a loan seems bonkers to me).
Find £550 a month, have a 15 year mortgage - £99,000 + £40k = £139,000.00 (an effective rate of 16%). £18k cheaper than the 30 year mortgage and it's paid off in half the time.
Going on your figures, house is £125,000, £40,000 deposit and thusly a £85,000 mortage:
20 year mortgage £442 per month - £106,080.00 + £40k = £146,080.00
25 year mortgage £372 per month - £111,600.00 + £40k = £151,600.00
30 year mortgage £327 per month - £117,720.00 + £40k = £157,720.00 (The idea of paying an effective rate of 40% on a loan seems bonkers to me).
Find £550 a month, have a 15 year mortgage - £99,000 + £40k = £139,000.00 (an effective rate of 16%). £18k cheaper than the 30 year mortgage and it's paid off in half the time.
Associate
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No, it goes to show they enter into hedging deals against the value of the mortgages via their Treasury functions that costs them money to get out of.
This. Wait until the end of the fixed term period and then pay off what you like on top of any 10% overpayments. Have you run any affordability checks on the different bank / building society websites?
I'd normally say go shorter term but if you think you've got the discipline to save then either 25 or 30 might suit you better.
if you are rubbish with money maybe, otherwise
1) keep some money in reserve initially (if possible assuming it does not limit your products )
2) minimum monthly payments and overpay (without limiting your products or sacrificing silly interest rates or off tie-ins)
Ideally you want one that lets you take back the overpayment reserve and portability would be nice...
If you can get one that allows overpayments with little to no penalty, then fair enough.
Still, my plan would be for the shortest term possible, out of the gate. Unless you're somehow good with investing etc. and the money is better utilised that way.
fair point
also always useful to have some savings and re the decision on whether to overpay perhaps a big factor ought to be simply whether your savings/investments are offering a better rate than your mortgage or not
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Would you buy this house?
£125,000 detached, new, 3 bedroom.
£125,000 detached, new, 3 bedroom.
Associate
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No! You won’t get a mortgage on it anyway. Would have to buy cash.
No it doesn't
It shows that you are changing the terms you originally agreed upon when taking out the mortgage and therefore have to pay a penalty.If you pay it off sooner they receive less interest!
One thing to consider is interest rates. Often you get a better rate with a shorter term because there is less risk, so the savings are compounded.
On the flip side, a longer term means it is easier for you if your financial situation gets worse.
If you take the longer term, does the 10% over-payment limit how much you will be able to pay off in a years. When we got our mortgage we were allowed unlimited overpayments so took the longer term mortgae and paid off as much as possible each month as the interest rates are quite high in the US (4.5% mortgage, 0.1% in savings account - go figure). we were often overpaying by 500-1000% each months, and took just a few years to pay off.
On the flip side, a longer term means it is easier for you if your financial situation gets worse.
If you take the longer term, does the 10% over-payment limit how much you will be able to pay off in a years. When we got our mortgage we were allowed unlimited overpayments so took the longer term mortgae and paid off as much as possible each month as the interest rates are quite high in the US (4.5% mortgage, 0.1% in savings account - go figure). we were often overpaying by 500-1000% each months, and took just a few years to pay off.
If you pay it off sooner then they take on less risk.No it doesn't
If you pay it off sooner they receive less interest!
Was veyr glad in the US you could overpay whatever you wanted to. In the UK you basically end up in the absrud situation where you wll have to simply save up for a year to two and then rem-mortgage the house with an increased downpayment. Mortgage provider might loose even more money.
Never. You would have an impossible time trying to re-sell in the future, and you will have to buy it cash up front
While i agree and would run for this hills its not that uncommon and possible to get a mortgage, I grew up in Durham and my parents were from Yorkshire where this sort of thing was very common.
I wouldn't touch it with a barge pole and im surprised a new build developer went for it, normally they whack a park/playground on the areas that close to the entries.
Is this as simple as just comparing the headline interest rates?
My bank account offers 3% interest on savings and my mortgage rate is currently 2.29%, so I'm better saving rather than overpaying?
I'd say the biggest thing is how strict you can be.
If you want to keep some savings for peace of mind look at the LTV bands to find out how much you need to put down to get different interest rates. ie putting down 10k deposit might get you 2% interest rate but 11k might allow you to get a 1.8% interest, or be able to get a tracker if you wanted one.
Play around with these...
https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator
https://www.moneysavingexpert.com/mortgages/best-buys/
If you want to keep some savings for peace of mind look at the LTV bands to find out how much you need to put down to get different interest rates. ie putting down 10k deposit might get you 2% interest rate but 11k might allow you to get a 1.8% interest, or be able to get a tracker if you wanted one.
Play around with these...
https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator
https://www.moneysavingexpert.com/mortgages/best-buys/
Maybe you didn't read the relevant part:
"Due To An Adverse Mining Report This Property Is not Suitable Security For Mortgage Purposes"
Soldato
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Go for lowest monthly commitment at a sensible interest rate regardless of duration, and pay extra off when you can (review yearly). This way you have leeway if times get suddenly tough, and you can pound the debt when times are good.