I am in a position whereby I can make overpayments on my mortgage, without fee. So was thinking of doing it. However, is it better to make mortgage overpayments or to put the money into an ISA or something? My current interest rate on the mortgage is on their base rate tracker at something rediculous like 1.25%. Means my mortgage payments have dropped from about 550 p/m to 350 p/m. I was thinking of overpaying on the mortgage to the original amount each month so that'll end up make my interest lower and my mortgager term lower too right? I also have a few thousand in savings that i could pay off a lump sum, but is that adviseable?
The numbers say that putting the money into your mortgate is not as good as putting the money into an ISA, as your mortgage rate is lower. However the difference really is negligible. However, i personally am chucking loads of money into my mortgage as overpayments, simply cos it is my only debt, and i'd rather see it go down, than some saving account going up, gaining very very little. Also, i have set my overpayment at what the figure would be with a 6% interest rate, i too am on a tiny rate (1.35%), so the base rate can move a lot and i'd not see any change i monthly outgoings.
Thanks for that. There are benefits for both really arent there. In savings it's nice to know that the money is there for a rainy day, as it were. Whereas if it's tied up in the house and was needed we'd struggle a bit. I think i might start overpaying anyway, and maybe pay off a chunk of savings, while still keeping some savings back for emergencies!
I am an advocate for paying off all debts asap. At the moment the interest rate on your mortgage is low, so take advantage of this by whacking down the capital amount due. Because if interest rates rise again soon (probable), you will have less capital due that will be liable for interest at the increased rate. Once your mortgage is cleared off you can then save whatever your monthly mortgage payments were straight into any savings scheme of your choice, or blow the lot on sweets and cars as I seem to do. The banks make money by the differentials between lending and savings rates. Judging by the salaries some bankers get, that should tell you all you need to know, and that the statistics are erring in their favour.
Well i don't have any other debts personally, the Mrs does but not me. Makes sense then to pay off as much mortgage as I can while the going's good, then if and when the interest rate does rise the monthly payments will be that much lower. If my mortgage was cleared off, i think I'd be treating myself to a few sweets too that's for sure! However, i cant see that happening for a few decades.
By me paying 80 extra a month on a 440 mortgage I save 8yrs on mine. I believe you can overpay on mortgages by 10% of outstanding balance and can underpay by what you have overpaid that year if the going gets tough. Check with your provider though. Any joy with sale? I see the for sale sign still up?
No contest, (redundancy ins against overpayment) pay the extra. You can always go to your bank if you need help (ie jobless..) saying you have got ahead. I trtied to get a mortgage holiday on the amount we were head on the mortgage , so I could improve the house. No chance....ha....banks....
I've only been paying 50/mth overpayment, but have currently reduced my mortgage by 8 yrs. Think of all the money you will save on interest payments over the years. Obviously not so much at the moment with the rate being so low, but it's going to go up at some point !
We've kinda given up on the sale at the minute, baby number 2 came along 2 weeks ago so the house is very much on the back burner for now. Still on the market mind, but are thinking of changing agents when we do decide to get a move on. Not bad for you and Gareth only having to overpay 80 to reduce by 8 years. Using the calculator above i need to pump in 200 a month extra to save 8 years. But still, i think i can afford that so it makes sense to do it. Maybe put in a lump sum for the moment too and slash some years off that way too. Cheers all, think thats decision made. now to actually do it!
Much better to overpay on the mortgage than save in an ISA. Don't forget that the extra money goes straight off the capital which you then won't pay interest on over the remaining term of the mortgage. I currently pay 250 extra a month and have done for a couple of years. I might stop saving and pay 500 a month extra, then i'll ditch some years.
Its not nearly as simple as that. Its actually better financially to put the money into an ISA than the mortgage if the ISA interest rate is higher than the mortgage interest rate, as the effect of the compound interest gains in the ISA are greater than the compund interest savings on the Mortgage.
Well looking at my ISA the interest rate is a mahoosive 0.50% gross per annum. So as my mortgage interest rate is 1.25% im better off overpaying yes?
ISA's last a year, and the sneaky lot revert back to the min 0.1 rate, without notifying you. So you have to juggle annually. Also, you cannot pay off lumpers, usually, from a mortgage. I'm still with rocco
I called my mortgage company who said that as i was out of the fixed term and now on their base rate tracker that i can pay off as much as i'd like without penalty or fee. The only thing being that <500 lump payments would be recalculated at my next statement, but >500 would mean that the balance would be recalculated immediately and any future minimum payment would reflect it instantly (ie better to pay >500 in lump sums). Didn't realise that about the ISA's rate, but makes sens why my rate is now so low. They don't half make it difficult do they!
thats a brilliant calculator Ive used it in the past and it really can be motivating knowing exactly how many years you can shave off by overpaying. I would definitely overpay on the mortgage its a real good feeling seeing those numbers go down.
It comes down to the interest rates and capital amounts in the mortgage and ISA accounts. The trouble is that savings accounts are paying so little at the moment that they are barely, if at all, above real world inflation. There is a real benefit in clearing debts off. It gives a very satisfying feeling of freedom and achievement. Not being onerously tied to a long term mortgage with the potential stresses of interest rate rises, losing a job, or ill health, is worth a lot. Not every thing in life can be judged using financial measures.
Aye, a mortgage is the one debt most people have to take out but i still don't like having it hanging over my head. The quicker its paid off the better as far as im concerned!
