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Thread: Mortgage overpayment advice

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    Default Mortgage overpayment advice

    just wanted your views on this. you may be able to offer me some advice as even though weve had a mortgage for over 7 years its still over my head. ok so me the wife and two kids are soon going to be needing a bigger house. we had our house on the market for over a year and nothing but stupid offers so we took it off as we just didnt have the equity in our house to be taking low offers. anyways we are happy to stay here for a little while longer until maybe things start picking up abit. last summer our fixed deal finished so our monthly payments dropped to the base rate which meant lower payments ( from £580 per month) to £480) so ive been saving that extra £100 and putting it in a saving account, i also buy shares at work. So long story short with the money ive saved and the shares i have, come june this year i will have roughly £7k, now some of you may say this is a no brainer but i dont know if im better paying that £7k off the mortgage or keeping it asside for when we do move to go towards the deposit. obviously this money isnt easy to come by so want to put the money where we are going to get the most benifit. any advice welcome thanks guys. rob

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    double post, again

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    Firstly, what is your current mortgage interest rate?

    Is it crucial to understand this before any advice can be offered.
    If the interest rate is lower than what you can invest it, then why bother reducing the mortgage, when you invest it and get a better return. Equity or cash is effectively the same.

    Cash ISA? These are tax free and offer probably reasonable returns....

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    Quote Originally Posted by Ste View Post
    Firstly, what is your current mortgage interest rate?

    Is it crucial to understand this before any advice can be offered.
    If the interest rate is lower than what you can invest it, then why bother reducing the mortgage, when you invest it and get a better return. Equity or cash is effectively the same.

    Cash ISA? These are tax free and offer probably reasonable returns....

    Thinks its now 4.7% I will double check this. We now owe £87k obviously if we move we'd get a more expensive house.

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    Regular Member bigdave1701's Avatar
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    With interest rates being as they are, saving it will give you little or no return for your money. However, if you pay a £7k lump off your mortgage, as house prices rise and fall, that £7k will become worth more or less.

    So for example, say you have a 100% mortgage (and 0% interest), owe £100k and pay off £7k, if the value of your house rises 10% with the market you will still only owe the remaining £93k but your £7k is now worth £17k. Remember this works in reverse too! So if you have the same scenario but the value falls 10%, you still owe £93k so your £7k is now worth -£3k.


    *EDIT*

    With regard to the above, the best savings rates available at the moment are around 2.5-3%

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    Regular Member Ste's Avatar
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    why the double posts all the time?

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    Regular Member Ste's Avatar
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    If it's that rate, then it may be better to overpay, but keep your monthly payments at the higher rate. I would doubt that you could consistently beat that and have good access to the cash with other investment vehicles.

    I am not a FA though, maybe you should seek some independant professional advice??

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    Regular Member lee gsi's Avatar
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    I am planing on doing the same thing.

    £6k lump sum and over pay by £100 a month.


    There are quite a few 'Mortgage Over Payment Calculators' on the net inc one on money saving expert: http://www.moneysavingexpert.com/mor...ent-calculator

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    Goes over my head too I put a £8 k deposit on my house been there 10 months rang up to sound them out as j was going to get £££ to do home improvments an the lady says ohhh that's odd your house has increased by 4k so I was like ohhh nice thinking I could get some £££ and they said nit jut yett ????? My house is 4k in profit I paid 8k I don't get it lol so I'm just goingto hang on

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    Regular Member TonyP2020's Avatar
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    If you dont mind saying, who is your mortage with??
    No, i'm not a FA either.

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