Overpay mortgage versus investing.
Discussion
We moved house recently which lead to a big jump in mortgage debt. In the past we've always over paid the mortgage with excess income after saving/pension but recently I been considering other options.....
I've just had the 12 month mortgage statment, despite our APR only been 2.2% we paid £9kish in interest last year. However after we put in a £10k overpayment the montly interest charged dropped by £100, compared to it going down by only £10-20/month without overpayment.
So essenitally a £10k overpayment essentially saves us at least £1000 over 12 month - am not entirely sure I can think of any kind of risk free investments that can offer that kind of return??
Needless to say I just put another overpayment lump sum into the morgagte and will probably now divert all 'spare' cash the way of the mortgage which is what we've always done......I like the idea of investments but when there is still a mortgage debt to pay off I just cannot see the logic of putting money any where else? Bare in mind the £100/month drop in interest paid is applied to the remaining length if the mortgage.
I've just had the 12 month mortgage statment, despite our APR only been 2.2% we paid £9kish in interest last year. However after we put in a £10k overpayment the montly interest charged dropped by £100, compared to it going down by only £10-20/month without overpayment.
So essenitally a £10k overpayment essentially saves us at least £1000 over 12 month - am not entirely sure I can think of any kind of risk free investments that can offer that kind of return??
Needless to say I just put another overpayment lump sum into the morgagte and will probably now divert all 'spare' cash the way of the mortgage which is what we've always done......I like the idea of investments but when there is still a mortgage debt to pay off I just cannot see the logic of putting money any where else? Bare in mind the £100/month drop in interest paid is applied to the remaining length if the mortgage.
We overpay by £300/£400 every month, then lump sums of a couple of thousand a couple of times a year as and when we can afford it.
Desperate to get shot of mortgage ASAP.
It's not just this year you've saved, but every subsequent year as well - this is now "guaranteed" (as in you've irretrievably reduced your capital from now on). Any saving / investment alternative may be subject to whim of bank amending / removing rate or stock performance.
Desperate to get shot of mortgage ASAP.
It's not just this year you've saved, but every subsequent year as well - this is now "guaranteed" (as in you've irretrievably reduced your capital from now on). Any saving / investment alternative may be subject to whim of bank amending / removing rate or stock performance.
gangzoom said:
We moved house recently which lead to a big jump in mortgage debt. In the past we've always over paid the mortgage with excess income after saving/pension but recently I been considering other options.....
I've just had the 12 month mortgage statment, despite our APR only been 2.2% we paid £9kish in interest last year. However after we put in a £10k overpayment the montly interest charged dropped by £100, compared to it going down by only £10-20/month without overpayment.
So essenitally a £10k overpayment essentially saves us at least £1000 over 12 month - am not entirely sure I can think of any kind of risk free investments that can offer that kind of return??
Needless to say I just put another overpayment lump sum into the morgagte and will probably now divert all 'spare' cash the way of the mortgage which is what we've always done......I like the idea of investments but when there is still a mortgage debt to pay off I just cannot see the logic of putting money any where else? Bare in mind the £100/month drop in interest paid is applied to the remaining length if the mortgage.
Are you sure about that APR?I've just had the 12 month mortgage statment, despite our APR only been 2.2% we paid £9kish in interest last year. However after we put in a £10k overpayment the montly interest charged dropped by £100, compared to it going down by only £10-20/month without overpayment.
So essenitally a £10k overpayment essentially saves us at least £1000 over 12 month - am not entirely sure I can think of any kind of risk free investments that can offer that kind of return??
Needless to say I just put another overpayment lump sum into the morgagte and will probably now divert all 'spare' cash the way of the mortgage which is what we've always done......I like the idea of investments but when there is still a mortgage debt to pay off I just cannot see the logic of putting money any where else? Bare in mind the £100/month drop in interest paid is applied to the remaining length if the mortgage.
BoRED S2upid said:
Overpay IMO as decent rates of interest can only be found through a S&S ISA and markets are up and down a lot at the moment plus most lenders will give you money back at the drop of a hat if everything went to pot and you needed some cash.
Not sure what relevance the markets currently being volatile is?Stella Tortoise said:
Are you sure about that APR?
Yeaph, APR is low but the magic of compound interest on a large sum locked in over a few decades is why banks love selling mortgages.....To achieve a similar return on a investment product with a much smaller amount over less times will equate to an APR return of over 10%!!!
I would be to be more than happy to be 'clever' with my money but when you do the hard numbers very few things beat paying off the mortgage ASAP - especially with 0% risk.
Once the mortgage is gone I can see the advantage of other products, but till we are 100% debt free am going to keep on putting money into the mortgage. When you see the numbers in black and white its hard to ignore
.Edited by gangzoom on Wednesday 24th October 22:47
I'm pretty new to both mortgages and long term savings (previous savings goal was obviously a deposit towards a house and a buffer left over having bought it).
I have a 5 year fixed which I'm almost 2 years into and overpay £413 a month, taking me to £900 a month total.
Ive then been putting £200 a month into a santander regular saver at 5% which matures this december, apparently this will have made £60 over the 12 months which isn't spectacular. Apparently the rate will drop for the next 12 months if I want to carry on with it for another 12 months. I won't be bothering.
I have a regular saver with hsbc with £250 a month going in at 5% over the 12 months, again I don't think I'll continue when it's up but it came with a switching deal.
I opened a S&S isa this year and put £100 a month in, adding extra when I can. When I stop paying into santander this will increase to £200 a month.
Looking at the savings accounts available HL offer 2.x% fixed over 2/3/5 years but I'd sooner just overpay my mortgage which is 2.1%. My main goal is to sit down with a mortgage broker in 3 years time and be able to drastically reduce the term of my mortgage. The way I see it that will mean a huge amount of freedom and less debt hanging over my head, and it's safe in terms of saving me money year on year.
I have a 5 year fixed which I'm almost 2 years into and overpay £413 a month, taking me to £900 a month total.
Ive then been putting £200 a month into a santander regular saver at 5% which matures this december, apparently this will have made £60 over the 12 months which isn't spectacular. Apparently the rate will drop for the next 12 months if I want to carry on with it for another 12 months. I won't be bothering.
I have a regular saver with hsbc with £250 a month going in at 5% over the 12 months, again I don't think I'll continue when it's up but it came with a switching deal.
I opened a S&S isa this year and put £100 a month in, adding extra when I can. When I stop paying into santander this will increase to £200 a month.
Looking at the savings accounts available HL offer 2.x% fixed over 2/3/5 years but I'd sooner just overpay my mortgage which is 2.1%. My main goal is to sit down with a mortgage broker in 3 years time and be able to drastically reduce the term of my mortgage. The way I see it that will mean a huge amount of freedom and less debt hanging over my head, and it's safe in terms of saving me money year on year.
ar-em-en said:
I'm pretty new to both mortgages and long term savings (previous savings goal was obviously a deposit towards a house and a buffer left over having bought it).
I have a 5 year fixed which I'm almost 2 years into and overpay £413 a month, taking me to £900 a month total.
Ive then been putting £200 a month into a santander regular saver at 5% which matures this december, apparently this will have made £60 over the 12 months which isn't spectacular. Apparently the rate will drop for the next 12 months if I want to carry on with it for another 12 months. I won't be bothering.
I have a regular saver with hsbc with £250 a month going in at 5% over the 12 months, again I don't think I'll continue when it's up but it came with a switching deal.
I opened a S&S isa this year and put £100 a month in, adding extra when I can. When I stop paying into santander this will increase to £200 a month.
Looking at the savings accounts available HL offer 2.x% fixed over 2/3/5 years but I'd sooner just overpay my mortgage which is 2.1%. My main goal is to sit down with a mortgage broker in 3 years time and be able to drastically reduce the term of my mortgage. The way I see it that will mean a huge amount of freedom and less debt hanging over my head, and it's safe in terms of saving me money year on year.
When we had our mortgage we mostly used nationwide as you can overpay but say something happened and you needed access to cash then you could withdraw the mortgage overpayments.I have a 5 year fixed which I'm almost 2 years into and overpay £413 a month, taking me to £900 a month total.
Ive then been putting £200 a month into a santander regular saver at 5% which matures this december, apparently this will have made £60 over the 12 months which isn't spectacular. Apparently the rate will drop for the next 12 months if I want to carry on with it for another 12 months. I won't be bothering.
I have a regular saver with hsbc with £250 a month going in at 5% over the 12 months, again I don't think I'll continue when it's up but it came with a switching deal.
I opened a S&S isa this year and put £100 a month in, adding extra when I can. When I stop paying into santander this will increase to £200 a month.
Looking at the savings accounts available HL offer 2.x% fixed over 2/3/5 years but I'd sooner just overpay my mortgage which is 2.1%. My main goal is to sit down with a mortgage broker in 3 years time and be able to drastically reduce the term of my mortgage. The way I see it that will mean a huge amount of freedom and less debt hanging over my head, and it's safe in terms of saving me money year on year.
Although you may make more with a s&s isa if you overpay your mortgage you WILL clear it early and pay less interest.
NickCQ said:
Talk to some of the chaps on the PCP threads. They usually have risk-free opportunities for their capital that yield in excess of 10% per annum, sure they would be happy to share some ideas.
Strangely thats partly why I didn't just jump into overpaying like mad when we moved to the new house.....Wanted to have a look at other possibilties.But when you get a letter through the post showing you how much money the bank is taking away from you in return for doing bugger all its hard to justify NOT trying to clear the debt ASAP.
With the old house we were able to pretty much cleared the mortgage within 10 years, now aiming hard to do the same with the new house. Just upped our montly payments and will aim to overpay another £15k this year.
The fat bankers must be lighting up another roll of cash to smoke everytime someone signs up to one of these things. £9k of guaranteed profit for 20+ years even at 2.2% APR, nice revenue stream to have for doing bugger all.
Edited by gangzoom on Thursday 25th October 07:14
Get the mortgage where you want it, where you are comfortable with, then start spreading your money into other things.
I moved house for the 3rd and final time 4yrs ago on a new 25yr term, nearly doubled what I owed. By battering the overpayments and I was putting in the maximum amount, I've now got it down to just under 10yrs to go. I'm happy that it's where I want it and have significant equity. I've tied in for 5 years to this current deal, and its likely I'll leave it now and arrange another 5yr deal once it's done and that will be it.
Because I can see the end in sight I'm now looking elsewhere for saving/investing....Probably mostly isa's.
Yes I could continue with the mortgage slaying and potentially be done in half the time but I'm happy with where it's at and can see benefits from looking at something else now.
I've been with nationwide the past 3 mortgage packages, really can't fault them. Because I've remained with them I'm allowed to overpay by 10% pa of the original borrowing, and not the rolling amount. Not sure if that's normal but it sure helps to stuff the extra cash is without penalty.
I moved house for the 3rd and final time 4yrs ago on a new 25yr term, nearly doubled what I owed. By battering the overpayments and I was putting in the maximum amount, I've now got it down to just under 10yrs to go. I'm happy that it's where I want it and have significant equity. I've tied in for 5 years to this current deal, and its likely I'll leave it now and arrange another 5yr deal once it's done and that will be it.
Because I can see the end in sight I'm now looking elsewhere for saving/investing....Probably mostly isa's.
Yes I could continue with the mortgage slaying and potentially be done in half the time but I'm happy with where it's at and can see benefits from looking at something else now.
I've been with nationwide the past 3 mortgage packages, really can't fault them. Because I've remained with them I'm allowed to overpay by 10% pa of the original borrowing, and not the rolling amount. Not sure if that's normal but it sure helps to stuff the extra cash is without penalty.
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