Mortgage "Overpayment" Strategies - Pay or Save?
Discussion
Afternoon,
Currently musing about what to do with paying my mortgage off early (which I haven't even taken out just yet!). I've got an offer of a two year 1.89% fixed ready and waiting as I'm going through the conveyance process. It's 30 years, but I'd like it done and dusted in 15 years (as my starter for 10).
I'm trying to figure out my overpayment strategy. Do I overpay an amount each month, or should I setup an investment fund and put the overpayments into that, and look at paying off a lump in the future? My job pays commission quarterly, and I can live off my base (unlike a lot of people I know) so would likely put that straight into another account out of the way and invest it.
Redemption fees aside, my gut feeling is that I setup a fund and put the overpayments into that each month, with a view to eventually paying the balance off. That way, I have fairly liquid cash accessible should something happen. I already have instant access to emergency funds, should I need to buy a cheap car / boiler / window at short notice. In the meantime, I'm still actually chipping away at the mortgage anyway, so in the worst case, i'd still actually pay the mortgage off.
Any views on the approach?
Currently musing about what to do with paying my mortgage off early (which I haven't even taken out just yet!). I've got an offer of a two year 1.89% fixed ready and waiting as I'm going through the conveyance process. It's 30 years, but I'd like it done and dusted in 15 years (as my starter for 10).
I'm trying to figure out my overpayment strategy. Do I overpay an amount each month, or should I setup an investment fund and put the overpayments into that, and look at paying off a lump in the future? My job pays commission quarterly, and I can live off my base (unlike a lot of people I know) so would likely put that straight into another account out of the way and invest it.
Redemption fees aside, my gut feeling is that I setup a fund and put the overpayments into that each month, with a view to eventually paying the balance off. That way, I have fairly liquid cash accessible should something happen. I already have instant access to emergency funds, should I need to buy a cheap car / boiler / window at short notice. In the meantime, I'm still actually chipping away at the mortgage anyway, so in the worst case, i'd still actually pay the mortgage off.
Any views on the approach?
I know with my mortgage with Nationwide, you can always have overpayments refunded if needed. I guess this only applies up to the point of re-mortgaging, but at least it gives a bit of security.
But if you believe investing will yield a higher return than the interest rate, then go for it, there's no better time.
But if you believe investing will yield a higher return than the interest rate, then go for it, there's no better time.
If it’s an offset mortgage just keep it paid in
If it’s not then you could simply dump all the what would be overpayments into an ISA and then when the time comes elect to drop it all into the mortgage to reduce the term. Key thing is to have ready cash as no one knows the future and IF job loss happens then you have a comfortable cushion for many many months.
Or you could elect to change the term to 25 years off the bat why 30 years or is that the affordability
If it’s not then you could simply dump all the what would be overpayments into an ISA and then when the time comes elect to drop it all into the mortgage to reduce the term. Key thing is to have ready cash as no one knows the future and IF job loss happens then you have a comfortable cushion for many many months.
Or you could elect to change the term to 25 years off the bat why 30 years or is that the affordability
You could try splitting it maybe? Pay down the mortgage with some and invest the rest to see how it goes.
I’ve been overpaying the last 4 years, but I can’t convince myself to invest it instead. Seeing the mortgage balance reduce by a big chunk each month is just too good a feeling - for some reason I get a buzz each time I overpay...and as they say - ‘investments can go down as well as up’.
Also never been a fan of the offset mortgage. Seeing my bank account in negative by tens of thousands would cause me to loose sleep at night and I’d be scared to spend anything! Ok it would be paid off much quicker, but I’d have no life for many years.
I’ve been overpaying the last 4 years, but I can’t convince myself to invest it instead. Seeing the mortgage balance reduce by a big chunk each month is just too good a feeling - for some reason I get a buzz each time I overpay...and as they say - ‘investments can go down as well as up’.
Also never been a fan of the offset mortgage. Seeing my bank account in negative by tens of thousands would cause me to loose sleep at night and I’d be scared to spend anything! Ok it would be paid off much quicker, but I’d have no life for many years.
rossub said:
(snip)
Also never been a fan of the offset mortgage. Seeing my bank account in negative by tens of thousands would cause me to loose sleep at night and I’d be scared to spend anything! Ok it would be paid off much quicker, but I’d have no life for many years.
First Direct - and I'm sure others - allow you to have separate "pots" for your accounts so you could have a "current", "savings" and "mortgage" account, all linked together. That would make it easier to keep a handle on things. Works for me anyway...Also never been a fan of the offset mortgage. Seeing my bank account in negative by tens of thousands would cause me to loose sleep at night and I’d be scared to spend anything! Ok it would be paid off much quicker, but I’d have no life for many years.
rossub said:
You could try splitting it maybe? Pay down the mortgage with some and invest the rest to see how it goes.
I’ve been overpaying the last 4 years, but I can’t convince myself to invest it instead. Seeing the mortgage balance reduce by a big chunk each month is just too good a feeling - for some reason I get a buzz each time I overpay...and as they say - ‘investments can go down as well as up’.
Also never been a fan of the offset mortgage. Seeing my bank account in negative by tens of thousands would cause me to loose sleep at night and I’d be scared to spend anything! Ok it would be paid off much quicker, but I’d have no life for many years.
My offset has 8 linked accounts. I’ve been overpaying the last 4 years, but I can’t convince myself to invest it instead. Seeing the mortgage balance reduce by a big chunk each month is just too good a feeling - for some reason I get a buzz each time I overpay...and as they say - ‘investments can go down as well as up’.
Also never been a fan of the offset mortgage. Seeing my bank account in negative by tens of thousands would cause me to loose sleep at night and I’d be scared to spend anything! Ok it would be paid off much quicker, but I’d have no life for many years.
One clearly is the Milano mortgage but I use my current account so simply see the balance of that when taking cash out - that said I don’t take cash out much it’s credit card or Apple Pay etc instead
Some good replies so far, so thanks. Paying off in chunks is definitely an option I’d consider - I would need to think about what product the mortgage was under, but the idea of growing a fund to cover potential redundancies amongst other things with a view to ultimately paying off the mortgage seems appealing.
devnull said:
Some good replies so far, so thanks. Paying off in chunks is definitely an option I’d consider - I would need to think about what product the mortgage was under, but the idea of growing a fund to cover potential redundancies amongst other things with a view to ultimately paying off the mortgage seems appealing.
Exactly. Let’s say you can get to a £20k pot / a pot with which your comfortable to cover 6 months out of work and being frugal whilst finding the next job.
You could then once built drop in any extra monthly or as per the T&Cs permit straight into the mortgage.
Comfort
I choose to overpay as much as I can at the end of each month and upon annual bonus payout. Getting the mortgage statements showing your debt reduce is very addictive and pleasing.
I have other savings, isa's, employee share plan etc but I always think it's too easy to talk yourself into spending when you see a positive balance.
At least when you overpay and capitalise the down payments it's gone as intended.
I've reduced a 25yr term down to 12yrs left to go after just 4yrs of payments. It's a great feeling getting your house in order!
I have other savings, isa's, employee share plan etc but I always think it's too easy to talk yourself into spending when you see a positive balance.
At least when you overpay and capitalise the down payments it's gone as intended.
I've reduced a 25yr term down to 12yrs left to go after just 4yrs of payments. It's a great feeling getting your house in order!
Edited by coljoh148 on Friday 11th May 19:56
coljoh148 said:
I choose to overpay as much as I can at the end of each month and upon annual bonus payout. Getting the mortgage statements showing your debt reduce is very addictive and pleasing.
I have other savings, isa's, employee share plan etc but I always think it's too easy to talk yourself into spending when you see a positive balance.
At least when you overpay and capitalise the down payments it's gone as intended.
I've reduced a 25yr term down to 12yrs left to go after just 4yrs of payments. It's a great feeling getting your house in order!
Well played - however that very dependant on the value of the mortgage you’d struggle to do that on a £750k mortgage whereas say a £180k mortgage that’s vastly easier. I have other savings, isa's, employee share plan etc but I always think it's too easy to talk yourself into spending when you see a positive balance.
At least when you overpay and capitalise the down payments it's gone as intended.
I've reduced a 25yr term down to 12yrs left to go after just 4yrs of payments. It's a great feeling getting your house in order!
Edited by coljoh148 on Friday 11th May 19:56
Welshbeef said:
coljoh148 said:
I'd struggle to sleep at night with a 750k mortgage never mind consider overpaying pay it! 
Surely depends on your position. Imagine say Ant and Dec it’s possible they might have a £30m Mortgage. It’s all relative.
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