Mortgage Rate Rises

[200sols]

Love it when people use the 'admin' excuse. It's literally 5 minutes of work.

 

[Pawnless Endgame]

Why do you want to overpay?

Current savings rates are higher than that as are mortgages, it doesn't make much sense to overpay in most cases.

I'm on a 2.79% fix until August 2026 and I want to throw as much money into the pot as possible before the fix ends, given the current climate.

I just called them back. I can overpay 10% of the original amount borrowed (£85K so £8,500) each year.

I'm with Nationwide and I'm the same as you - I can overpay by 10% of the original loan amount. I'm 17 years into a 25-year mortgage and I intend to chop 4 years off that, so finishing after 21 years. I have changed my direct debit so to make regular overpayments.

 

[Bluecube]

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.

My mortgage with Nationwide is like like this. You can overpay every year upto 10% of the original mortgage

 

[413x]

I'm on a 2.79% fix until August 2026 and I want to throw as much money into the pot as possible before the fix ends, given the current climate.



I'm with Nationwide and I'm the same as you - I can overpay by 10% of the original loan amount. I'm 17 years into a 25-year mortgage and I intend to chop 4 years off that, so finishing after 21 years. I have changed my direct debit so to make regular overpayments.

If you're on 2.79.

Why not pop it in a 5pc isa and dump it in at term end.
That way you'll be able to add what you would + 5pc.

As far as I know, once you're out of the lock in period there's no restrictions to reducing the balance?

 

[dowie]

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.

No

I still don't buy the idea that saving to pay off in a lump sum is better than overpaying every month.

It is when the rates on savings are higher - basic maths.

 

[dowie]

I'm on a 2.79% fix until August 2026 and I want to throw as much money into the pot as possible before the fix ends, given the current climate.

That's contradictory - if you wanted to throw as much money into the pot as possible you'd *not* overpay before the fix ended but rather save the additional cash instead.

Or at least in most cases - if you've got some additional reason related to benefits or something as per the other poster who commented.

 

[m4rmite]

Cash usually. They don't accept IOUs.

Isn't that what a mortgage is though?

 

[Deep]

TBH it's probably not going to make a huge difference whether you overpay every month or in one lumps sum.
I for one chose to do it monthly, and Halifax did something cool. I fixed the payment at say £1,700 and even though the actual repayment would change every month they would keep it a fixed £1,700 every month. This helped me budget monthly AND also overpay

 

[glenimp617]

What's a good savings account these days?

 

[Pawnless Endgame]

If you're on 2.79.

Why not pop it in a 5pc isa and dump it in at term end.
That way you'll be able to add what you would + 5pc.

As far as I know, once you're out of the lock in period there's no restrictions to reducing the balance?

That's contradictory - if you wanted to throw as much money into the pot as possible you'd *not* overpay before the fix ended but rather save the additional cash instead.

Or at least in most cases - if you've got some additional reason related to benefits or something as per the other poster who commented.

Yeah I can't have more than £6,000 in capital. It's not because of Universal Credit but related to a legacy benefit which will end soon. So it's effective for me to keep £1500 in savings (for emergencies) and £1500 in my current account (remember current account also counts as capital) to make it around £3000 total capital and throw in what I can afford into overpaying the mortgage.

 

[ljt]

In reality the difference of changing term or payments only makes a difference if your planning on maximum additional repayments or close to.
If your not close to maxing it then you can still pay off whatever you want and it will result in exactly the same position long term.

Many mortgages now limit the overpayments to the original borrowing (typically 10%). For many the 10% is out of reach anyway so its somewhat of a paper problem.
If your in the realms of being able to pay off the 10% then having your repayments reduced does limit your overall maximum payment per year, but again unless you talking long term the impact is somewhat limited.

Eg if you pay 10% overpayment from year 1 you will wipe out the mortgage around year 7. Thats pretty massive.
The impact of it affecting your repayments is only a few months so whilst annoying no massive amount, and if you for example took a 5 year fixed you can simply save the extra and smash the mortgage when that deal expires.

You may actually find remortgaging slightly tricky at that point depending on lender, but you will for sure find a good deal as by then you would be probably talking a LTV of like 20-30% and thats about as safe an investment as you can get.
And at that point things like trackers are really good bets (assuming your ability to repay funds remains the same)

I have about £68.5k left on my mortgage (apparently zoopla estimates its worth around £310k although I'm not sure how accurate it is), on a fixed rate of 1.69% until Dec 2025 and a total of 14 years and 7 months on the total term. So the total I could pay, as you say is 10% a year unless I want to incur a penalty. I have a lump sum I want to pay off (around £15-20k) but I'd have to split that over multiple years. So instead I put it into a savings and waiting until the end of my fixed term next December. I was basically hoping to negate the rise in mortgage rates by the time I come to look for a new deal and keeping my mortgage as short as possible, while not paying anymore a month than I am now.

 

[EvilRob]

I have about £68.5k left on my mortgage, fixed rate of 1.69% until Dec 2025 and a total of 14 years and 7 months on the total term. So the total I could pay, as you say is 10% a year unless I want to incur a penalty. I have a lump sum I want to pay off (around £15-20k) but I'd have to split that over multiple years. So I'm instead I put it into a savings and waiting until the end of my fixed term next December. I was basically hoping to negate the rise in mortgage rate by keeping my mortgage as short as possible, while not paying anymore a month than I am now.

Maybe reduce the term significantly when you renew? Seems like having such a long term on such a low mortgage amount is a contributing factor here i.e. If your monthly payments were higher, you wouldnt need to use so much of your overpayment allowance.

 

[dlockers]

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.


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.

Dude I am not teaching key stage 2 maths to an adult.

 

[Participant]

Transfer money to your lender.

Fin.

 

[Nutty667]

No



It is when the rates on savings are higher - basic maths.

It's not that simple though. If your ISA allowance is used up, and you're already over the personal savings allowance for say 40% tax earner, your additional savings interest will be taxed 40%. I.e. 5% savings account, you will only get 3% after tax.
Of course this is specific circumstances, but not that uncommon.

 

[ljt]

Maybe reduce the term significantly when you renew? Seems like having such a long term on such a low mortgage amount is a contributing factor here i.e. If your monthly payments were higher, you wouldnt need to use so much of your overpayment allowance.

That was one of the things I was thinking about. It will depend on what the interest rates are towards the end of next year really. However, I've also had a shock to my income in the last 12 months (redundancy last July after 20 years with the company) I'm now on minimum wage as I've changed my career path and I'm basically starting from scratch again. So my priority at the moment is keeping outgoings to a minimum, and reducing my mortgage would be the easiest to target.

 

[dowie]

It's not that simple though. If your ISA allowance is used up, and you're already over the personal savings allowance for say 40% tax earner, your additional savings interest will be taxed 40%. I.e. 5% savings account, you will only get 3% after tax.
Of course this is specific circumstances, but not that uncommon.

It is that simple though in most cases, obviously, if you're not getting the returns on the savings then it doesn't apply.

The point is to compare the returns.

 

[MatsyLR]

My savings is 5.1% (£19k currently)
Mortgage is 4.49% (£28k left 7 years)

the difference is so small that I don't care. I'd rather reduce the term to be debt free sooner.

 

[Tom|Nbk]

My savings is 5.1% (£19k currently)
Mortgage is 4.49% (£28k left 7 years)

the difference is so small that I don't care. I'd rather reduce the term to be debt free sooner.

Very similar position and absoloutely the right train of thought.

 

[a1ex2001]

My savings is 5.1% (£19k currently)
Mortgage is 4.49% (£28k left 7 years)

the difference is so small that I don't care. I'd rather reduce the term to be debt free sooner.

For those numbers I agree you’re not going to see a great deal of difference no matter what you do. My mortgage is sat at 1.25% and my savings are at 5.1% so I won’t be making any over payments just now!