Mortgage Rate Rises

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.
 
Poolybit said:
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 :D
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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.

Obviously that depends on your mortgage being lower than best fixes around.
 
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
 
the_worrier said:
I just called them back. I can overpay 10% of the original amount borrowed (£85K so £8,500) each year.
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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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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.
 
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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.
 
Scam said:
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.
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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.
 
200sols said:
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.
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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.
dlockers said:
You are arguing maths?
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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.
 
www.moneysavingexpert.com

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 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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Scam said:
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.
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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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Scam said:
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.
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Interest is usually calculated daily, calculated is not the same as paid.
 
Scam said:
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.
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:cry:
 
Siliconslave said:
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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Well you said it though. Nobody is on a 25yr fix. And more importantly savings rates are not going to stay the same for that long. I was trying to use that calculator for our circumstances, on a 5yr fix (now only 3 years left mind) and even though our mortgage rate is very low and savings rate were half-decent back when I looked into it, there wasn't enough of a 'saving' (or rather money to be earned) over that 3-4yr period left of our fix to make the admin worthwhile.

dlockers said:
:cry:
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Ok. And as above, do it for 3 years left on that 2% mortgage rate, locking away £500/month for that period of time and then dumping it in.
 
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