Should I be overpaying?
Discussion
I was wondering what best bets are regarding saving/overpayment on mortgage :
Recently we have started overpaying our mortgage to the max they will allow, been doing it the last 6 months, £500 per month is the max on this mortgage (payment is around £1100 as standard). We are nearly 16 months into our 24 month fixed deal which is 4% - 4.5%, I forget exactly. I save another lump each month into another account to try and get a return, and some into premium bonds for a bit of fun. My thinking was that overpaying was a far better use of spare money than savings accounts as presumably unless I can generate over 4.5% return in savings then paying it off mortgage is the best bet?
However, the reason we started overpaying was so that when renewal time came round next Aug we would be able to re-mortgage at 75 or 80% LTV from the 90% we initially borrowed. But now the property has gone up so much in value (based on what others are selling for) I think we're already down to around 70% LTV (assuming an average of the sold prices for similar stuff), so is it worth overpaying still or should I just put the £500 into something else?
Lastly, when I do remortgage, are their options that allow unlimited overpayment? As said, currently we are limited to the £500, when ideally I could overpay by £2000 each month as like above (I think?) it seems like a better savings vehicle than any of the current bank accounts out there?
Bit of a ramble but hopefully makes sense...
Recently we have started overpaying our mortgage to the max they will allow, been doing it the last 6 months, £500 per month is the max on this mortgage (payment is around £1100 as standard). We are nearly 16 months into our 24 month fixed deal which is 4% - 4.5%, I forget exactly. I save another lump each month into another account to try and get a return, and some into premium bonds for a bit of fun. My thinking was that overpaying was a far better use of spare money than savings accounts as presumably unless I can generate over 4.5% return in savings then paying it off mortgage is the best bet?
However, the reason we started overpaying was so that when renewal time came round next Aug we would be able to re-mortgage at 75 or 80% LTV from the 90% we initially borrowed. But now the property has gone up so much in value (based on what others are selling for) I think we're already down to around 70% LTV (assuming an average of the sold prices for similar stuff), so is it worth overpaying still or should I just put the £500 into something else?
Lastly, when I do remortgage, are their options that allow unlimited overpayment? As said, currently we are limited to the £500, when ideally I could overpay by £2000 each month as like above (I think?) it seems like a better savings vehicle than any of the current bank accounts out there?
Bit of a ramble but hopefully makes sense...
okgo said:
I was wondering what best bets are regarding saving/overpayment on mortgage :
Recently we have started overpaying our mortgage to the max they will allow, been doing it the last 6 months, £500 per month is the max on this mortgage (payment is around £1100 as standard). We are nearly 16 months into our 24 month fixed deal which is 4% - 4.5%, I forget exactly. I save another lump each month into another account to try and get a return, and some into premium bonds for a bit of fun. My thinking was that overpaying was a far better use of spare money than savings accounts as presumably unless I can generate over 4.5% return in savings then paying it off mortgage is the best bet?
However, the reason we started overpaying was so that when renewal time came round next Aug we would be able to re-mortgage at 75 or 80% LTV from the 90% we initially borrowed. But now the property has gone up so much in value (based on what others are selling for) I think we're already down to around 70% LTV (assuming an average of the sold prices for similar stuff), so is it worth overpaying still or should I just put the £500 into something else?
Lastly, when I do remortgage, are their options that allow unlimited overpayment? As said, currently we are limited to the £500, when ideally I could overpay by £2000 each month as like above (I think?) it seems like a better savings vehicle than any of the current bank accounts out there?
Bit of a ramble but hopefully makes sense...
£500pm max overpayment sounds like a Nationwide product?Recently we have started overpaying our mortgage to the max they will allow, been doing it the last 6 months, £500 per month is the max on this mortgage (payment is around £1100 as standard). We are nearly 16 months into our 24 month fixed deal which is 4% - 4.5%, I forget exactly. I save another lump each month into another account to try and get a return, and some into premium bonds for a bit of fun. My thinking was that overpaying was a far better use of spare money than savings accounts as presumably unless I can generate over 4.5% return in savings then paying it off mortgage is the best bet?
However, the reason we started overpaying was so that when renewal time came round next Aug we would be able to re-mortgage at 75 or 80% LTV from the 90% we initially borrowed. But now the property has gone up so much in value (based on what others are selling for) I think we're already down to around 70% LTV (assuming an average of the sold prices for similar stuff), so is it worth overpaying still or should I just put the £500 into something else?
Lastly, when I do remortgage, are their options that allow unlimited overpayment? As said, currently we are limited to the £500, when ideally I could overpay by £2000 each month as like above (I think?) it seems like a better savings vehicle than any of the current bank accounts out there?
Bit of a ramble but hopefully makes sense...
Personally, I would overpay as much as you can reasonably afford, as quick as you can. Your LTV may have gone down, but the actual debt hasn't and still needs to be repaid. The LTV just allows you to reduce the cost of your debt, which means that more of your total payment is reducing the capital. There are products that will allow you to overpay 10% of your balance each year, 20% of the balance or unlimited payments if required.
Also worth thinking about is that rates won't be as low as they are currently for the rest of the term of your mortgage.....
My thinking on this is similar to yours. I overpay as much as I can. I'm limited to 10% of the outstanding balance in any (financial) year and 2 years through a 5 year fix at 3.45% at present. My payments are around £900 (this reduces with every overpayment, the term stays at 25 years) and I top this up to a £2000 payment. I'll be able to keep this level of overpayment up for two more years before I am limited by the 10% rule.
My understanding is that tracker mortgages tend to allow bigger overpayments but this is my first mortgage and I didn't look too closely at other products. The obvious way around overpayment limits is to reduce the term at re-mortgage time. This is what I'll be doing if I stay in my current property after 2017. Shorten the term to 10-15 years and ramp the monthly payment up.
Favourite website, savings are immense:
http://www.moneysavingexpert.com/mortgages/mortgag...
My understanding is that tracker mortgages tend to allow bigger overpayments but this is my first mortgage and I didn't look too closely at other products. The obvious way around overpayment limits is to reduce the term at re-mortgage time. This is what I'll be doing if I stay in my current property after 2017. Shorten the term to 10-15 years and ramp the monthly payment up.
Favourite website, savings are immense:
http://www.moneysavingexpert.com/mortgages/mortgag...
CharlieGee said:
My understanding is that tracker mortgages tend to allow bigger overpayments but this is my first mortgage and I didn't look too closely at other products. The obvious way around overpayment limits is to reduce the term at re-mortgage time. This is what I'll be doing if I stay in my current property after 2017. Shorten the term to 10-15 years and ramp the monthly payment up.
Tracker mortgages do not allow bigger overpayments than fixed rates, the only difference is how the rate is applied to your balance each month.Reducing the terms does not in any way reduce overpayment limits. If the over payment limit is 10% of you BALANCE per year, then thats what it is, it doesn't matter if your term is 10 years or 30 years.....
Sarnie said:
CharlieGee said:
My understanding is that tracker mortgages tend to allow bigger overpayments but this is my first mortgage and I didn't look too closely at other products. The obvious way around overpayment limits is to reduce the term at re-mortgage time. This is what I'll be doing if I stay in my current property after 2017. Shorten the term to 10-15 years and ramp the monthly payment up.
Tracker mortgages do not allow bigger overpayments than fixed rates, the only difference is how the rate is applied to your balance each month.Reducing the terms does not in any way reduce overpayment limits. If the over payment limit is 10% of you BALANCE per year, then thats what it is, it doesn't matter if your term is 10 years or 30 years.....
You seem to have missed the point that if the term is reduced you will have a bigger payment each month and, therefore, less money left to overpay and less need to do so. Not sure if you're being wilfully obtuse...
Sarnie said:
£500pm max overpayment sounds like a Nationwide product?
Personally, I would overpay as much as you can reasonably afford, as quick as you can. Your LTV may have gone down, but the actual debt hasn't and still needs to be repaid. The LTV just allows you to reduce the cost of your debt, which means that more of your total payment is reducing the capital. There are products that will allow you to overpay 10% of your balance each year, 20% of the balance or unlimited payments if required.
Also worth thinking about is that rates won't be as low as they are currently for the rest of the term of your mortgage.....
Nationwide yes. Personally, I would overpay as much as you can reasonably afford, as quick as you can. Your LTV may have gone down, but the actual debt hasn't and still needs to be repaid. The LTV just allows you to reduce the cost of your debt, which means that more of your total payment is reducing the capital. There are products that will allow you to overpay 10% of your balance each year, 20% of the balance or unlimited payments if required.
Also worth thinking about is that rates won't be as low as they are currently for the rest of the term of your mortgage.....
So when renewal comes round, assuming my ltv is 70% will I be able to get a longer term fixed with more flex for overpaying?
I doubt we will stay here long enough to pay it off totally but the idea being that when we do sell we have a decent lump as deposit on the next place..
CharlieGee said:
Obviously.
You seem to have missed the point that if the term is reduced you will have a bigger payment each month and, therefore, less money left to overpay and less need to do so. Not sure if you're being wilfully obtuse...
Not being obtuse just correcting your mis-information.You seem to have missed the point that if the term is reduced you will have a bigger payment each month and, therefore, less money left to overpay and less need to do so. Not sure if you're being wilfully obtuse...
okgo said:
Nationwide yes.
So when renewal comes round, assuming my ltv is 70% will I be able to get a longer term fixed with more flex for overpaying?
I doubt we will stay here long enough to pay it off totally but the idea being that when we do sell we have a decent lump as deposit on the next place..
Yes, when your renewal comes round you will be able to source a longer term fixed and filter out the products that have restrictive overpayment facilities like your current product.So when renewal comes round, assuming my ltv is 70% will I be able to get a longer term fixed with more flex for overpaying?
I doubt we will stay here long enough to pay it off totally but the idea being that when we do sell we have a decent lump as deposit on the next place..
What you usually find is that the most flexible products have less competitive rates. What they give to you in one hand, they take in another........
Sarnie said:
Not being obtuse just correcting your mis-information.
If you re-read what I wrote I think you will (at least I hope you will) realise that a 'way around overpayment limits' does not necessarily mean that I think they are higher for a mortgage with a shorter term. Indeed, the fact that you think anyone could be that dim is quite revealing.I take your point about my incorrect comparison of trackers and fixed rate mortgages.
Sarnie said:
Not being obtuse just correcting your mis-information.
If you re-read what I wrote I think you will (at least I hope you will) realise that a 'way around overpayment limits' does not necessarily mean that I think they are higher for a mortgage with a shorter term. Indeed, the fact that you think anyone could be that dim is quite revealing.I take your point about my incorrect comparison of trackers and fixed rate mortgages.
CharlieGee said:
If you re-read what I wrote I think you will (at least I hope you will) realise that a 'way around overpayment limits' does not necessarily mean that I think they are higher for a mortgage with a shorter term. Indeed, the fact that you think anyone could be that dim is quite revealing.
I take your point about my incorrect comparison of trackers and fixed rate mortgages.
I know what you meant but thats not how it read or how others may who may take that 'advice' may interpret it either.I take your point about my incorrect comparison of trackers and fixed rate mortgages.
Not being obtuse at all, but throwaway advice here could lead to someone seeking out a specific product that isn't the best choice for them given their circumstances as a whole....
You can put 15k into an isa, so that's 30k if you open two (one each) with no CGT to pay on the profits. I'm sure you could get a better return than your mortgage rate. Also, it might be a more liquid option if your mortgage overpayments can't all be taken back in the chase of an emergency?
ukwill said:
You can put 15k into an isa, so that's 30k if you open two (one each) with no CGT to pay on the profits. I'm sure you could get a better return than your mortgage rate. Also, it might be a more liquid option if your mortgage overpayments can't all be taken back in the chase of an emergency?
I thought they might do ok, but I didn't know it would be better than 4% or so? Wasn't that clear I guess, but I already have around £40k in bonds/saving accounts so its not a case of its one or the other, I just figured I might aswell overpay and keep toppping the others up while I'm limited to the £500 cap.
Overpay mortgage as much as you can each month.
At the end of your fixed term you will be able to pay off a lump sum without penalty. repeat each time you re-mortgage.
When you re-mortgage, you can also reduce the term of the mortgage to to ensure you repayments are higher. However, as your mortgage term and loan is less, you are paying off more capital and less interest.
Savings accounts are not worth it atm - you would be better paying off any debt.
At the end of your fixed term you will be able to pay off a lump sum without penalty. repeat each time you re-mortgage.
When you re-mortgage, you can also reduce the term of the mortgage to to ensure you repayments are higher. However, as your mortgage term and loan is less, you are paying off more capital and less interest.
Savings accounts are not worth it atm - you would be better paying off any debt.
When we last bought a house (with Nationwide) we had three mortgage accounts. This has allowed us to pay one mortgage off, and make overpayments of £1000/ month on the other two.
Not sure at the time why Nationwide set it up like this for us - but over the last eight years it has really helped us reduce the capital and money we will pay.
Mike
Not sure at the time why Nationwide set it up like this for us - but over the last eight years it has really helped us reduce the capital and money we will pay.
Mike
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