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Author Mortgage Overpayment Advice
Matt.H
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Registered: 12th Mar 03
Location: Church Gresley, Derbyshire
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14th Jul 09 at 09:02   View User's Profile U2U Member Reply With Quote

Recently I have just dropped off a 2yr fixed deal with a interest rate of 6.09%. I'm now on a rate of 4.78% or there abouts. This equates to my mortgage being 94 cheaper a month. No i was goin to continue paying off my mortgage at the amount when it was 6% but a mate said i'd be better at putting the difference into an ISA or savings account. I went with the savings account option with the intention of paying a lump sum off. BUT...after seeing a bloke I work with he said i'm better off overpaying each month as interest is calculated daily. Now i know i dont get penalised for making overpayments but just wondered what people on here thought was the best option.

Thanks.
Cosmo
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Registered: 29th Mar 01
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14th Jul 09 at 09:08   View User's Profile U2U Member Reply With Quote

Id personally be putting it away into a savings account or ISA.

Few reasons really (without doing the maths behind it all admittedly) - Id hazard a guess the monetry difference between the two is next to nothing. If you are putting it away then you have access to it for a 'rainy day' just incase something happens and you really need it, if you were putting it in to the mortgage then you would really have access to it.
whitter45
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Registered: 15th Nov 02
Location: Norton
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14th Jul 09 at 09:18   View User's Profile U2U Member Reply With Quote

in my opinion 100 a momth extra over a short term is not going t make any difference so I would enjoy it or save as rates are bound to go up in the near future i.e next 2 years
Matt.H
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Registered: 12th Mar 03
Location: Church Gresley, Derbyshire
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14th Jul 09 at 11:52   View User's Profile U2U Member Reply With Quote

Cosmo...I agree with you. One good reason for having it in my savings is so I can get to it if need be. Especially with work being sketchy at the minute. Im not too fussed about gaining interest on savings as to get a good rate you need a silly amount of money. Just aslong as I know where my money is I'm happy.

As I now owe more than what the house is worth I wanted to try pay some off to get that down abit so I'm in a better position to jump on a fixed rate if mortage rates were to start going up again.
Cosmo
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Registered: 29th Mar 01
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14th Jul 09 at 11:56   View User's Profile U2U Member Reply With Quote

quote:
Originally posted by Matt.H
As I now owe more than what the house is worth I wanted to try pay some off to get that down abit so I'm in a better position to jump on a fixed rate if mortage rates were to start going up again.


No reason why you cant then throw what you've saved in to a new mortgage deal as a larger deposit to lower the amount you'd need to borrow.
BlueCorsa
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Registered: 14th Jan 04
Location: Midlands Drives: MB SLK250 CDI
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14th Jul 09 at 12:05   View User's Profile U2U Member Reply With Quote

I overpay by about 250 per month, about 2 years ahead on paying it off already.
A2H GO
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Registered: 14th Sep 04
Location: Stoke
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14th Jul 09 at 12:06   View User's Profile U2U Member Reply With Quote

Me personally id pay it off the mortgage each month, remember no interest is charged on overpayments, they come straight off the balance meaning you can either shorten the term or lower the repayments for when rates go back up. Again, it depends on the circumstances, are you likely to need the money in the near future?
RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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14th Jul 09 at 12:26   View Garage View User's Profile U2U Member Reply With Quote

I can overpay by 499 per month before early repayment charges kick in. I worked out that if I start doing that from January, I'll pay the mortgage of in 12 years or so instead of the 23 we have left and save a ridiculous amount in interest payments.

The other argument for overpaying is thta a bank/building society is likely to be more lenient if you stuff up/fall behind with normal payments as you would be ahead in real term payments. With my mortgage I can take pre-arranged payment breaks but they're easier to set up if you're already ahead with payments
AndyKent
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Registered: 3rd Sep 05
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14th Jul 09 at 12:27   View User's Profile U2U Member Reply With Quote

Yep, as above - I would be overpaying as well.

Its going to earn naff all in a savings account at the moment so I'd be paying off as much as possible before the interest rates go up again.
Cosmo
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Registered: 29th Mar 01
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14th Jul 09 at 12:28   View User's Profile U2U Member Reply With Quote

He shouldnt fall behind anyway, as he'll have this money saved should he lose his job etc. and also be able to afford to live off it.

If its all in his house he is going to struggle to free up that cash if he loses his job.
RichR
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14th Jul 09 at 12:38   View Garage View User's Profile U2U Member Reply With Quote

If it was only short term its probably not worth it but if you could continue it for a good duration of 3/4/5 years; it would be worthwhile.

I looked over my mortgage statement the other day and I think I've paid approx. 2750 off the capital for 13,000 of payments. If I'd hit the maximum permissible overpayments over that 18 months I could have paid off an extra 8982 off the capital.
RichR
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14th Jul 09 at 12:39   View Garage View User's Profile U2U Member Reply With Quote

even if I'd only managed 100 a month it would still be 1800 extra capital paid off!
Ian
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Registered: 28th Aug 99
Location: Liverpool
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14th Jul 09 at 18:08   View Garage View User's Profile U2U Member Reply With Quote

Overpay.

You would need a fantastic rate to offset the interest accrued on a debt of that duration.


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_Allan_
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Registered: 24th Mar 04
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14th Jul 09 at 19:52   View User's Profile U2U Member Reply With Quote

quote:
Originally posted by Ian
Overpay.

You would need a fantastic rate to offset the interest accrued on a debt of that duration.


+1

Although it would be nice to get your hands on the cash if needed, even with notice etc... You would need an excellent interest rate as said. At the moment it's not the best time for savings rates. As the overpayment is optional you could contnue to do so until interest rates pick up.
Matt.H
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Registered: 12th Mar 03
Location: Church Gresley, Derbyshire
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14th Jul 09 at 20:50   View User's Profile U2U Member Reply With Quote

Thanks guys...as said above, this was my first choice but cos of what a mate said it seemed a good idea at the time to go with that. Will give my mortgage firm a ring and see what I can do. Cheers
A2H GO
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Registered: 14th Sep 04
Location: Stoke
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15th Jul 09 at 07:09   View User's Profile U2U Member Reply With Quote

Also, most mortgage companies, say you overpay all the time and so are in 'credit' with your payments by for example by 4000 and your payments are 500 a month, they will let you stop paying for 8 months and just use the money you have overpaid by, so if you ever get in a situation where you loose your job ect you wouldnt have to pay the mortgage anyway. Im with britannia and they allow this but check it out with your provider first.
Dan
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Registered: 22nd Apr 02
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15th Jul 09 at 09:22   View Garage View User's Profile U2U Member Reply With Quote

Have a look on money saving expert, there was a big article about it a lil while back. I would defo overpay.


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a_j_mair
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Registered: 23rd Jan 04
Location: Scotland
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15th Jul 09 at 15:02   View User's Profile U2U Member Reply With Quote

id stick it in a savings account, then overpay a lump sum after you have a little saved up

dont want all your eggs in the one basket imo
RichR
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Registered: 17th Oct 01
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15th Jul 09 at 15:35   View Garage View User's Profile U2U Member Reply With Quote

quote:
Originally posted by a_j_mair
id stick it in a savings account, then overpay a lump sum after you have a little saved up

dont want all your eggs in the one basket imo


If I pay a lump sum I get hit with overpayment charges, If I pay upto 499 overpayment per month I get no overpayment charge.
Cosmo
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Registered: 29th Mar 01
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15th Jul 09 at 15:39   View User's Profile U2U Member Reply With Quote

He is only looking to pay 94 extra a month over. He could save up a year and more or less pay that whole lump saved over the next 2 months if he wanted (given his is a similar limit to yours).
a_j_mair
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Registered: 23rd Jan 04
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15th Jul 09 at 16:00   View User's Profile U2U Member Reply With Quote

quote:
Originally posted by a_j_mair
eggs in the one basket


better to have a few options imo
strick206
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Registered: 12th Apr 07
Location: Wigan Drives:Integra DC5
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16th Jul 09 at 08:55   View User's Profile U2U Member Reply With Quote

Defo overpay each month, it will have far more benefit to you than putting it in a savings account, will shortern the term of your mortgage or lower the repayments if needed.

I will be trying to overpay where i can when my house finally goes through, but it will be unlikely for the first few years
Ian
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Registered: 28th Aug 99
Location: Liverpool
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16th Jul 09 at 17:54   View Garage View User's Profile U2U Member Reply With Quote

By the way, my advice assumes you've no other debts.

You wouldn't, for example, overpay if you had personal loan or overdraft interest accruing while you were moving money elsewhere.

[Edited on 16-07-2009 by Ian]


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Matt.H
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Registered: 12th Mar 03
Location: Church Gresley, Derbyshire
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16th Jul 09 at 20:52   View User's Profile U2U Member Reply With Quote

Yeah...The mortgage is the only debt I have. Made sure of that before I bought a house.

 
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