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In a quandry about what to do with my mortgage. I'm on the base rate of 2.5% after our fixed rate finished 4 years ago. Weve been overpaying by 30% for the last 4 years, and have just increased our overpayment to 50%. However, i am thinking about moving all the payments i put into my savings each month into my mortgage. This would make the overpayment 114% a month. Has anyone else just thrown all their money into their mortgage, and gone without the luxuries. Is this a good thing to do? Just how much is the money worth in the long run ie if you put in £100 a month to the mortgage, is it worth £300 in the long run. As i see it, if that is the case, its the equivalant of a savings interest rate of 300%. Does that make sense?
Much better off paying what you can off your mortgage. Compound interest is a bitch.
See overpayment calculator at [url= http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator ]http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator[/url] to get an idea of what it could save you!
Firstly let me say that I am not qualified to give financial advice etc. 🙂
What decides if it's worth doing is a combination of:
[*] the difference between interest rates on your savings (net) and the rate that you're paying on your mortgage
how long the mortgage has to run
the amount outstanding on the mortgage[/*]
So without knowing the precise figures it's hard to say.
My [b]personal [/b]view is that it's worth paying down as much of the mortgage as you can afford as soon as possible as long as the mortgage rate is greater than the net interest on savings. Apologies if I'm teaching you to suck eggs here but in the early days of the mortgage you're paying mostly interest (assuming a repayment mortgage) but as time goes on each payment pays more capital. So any overpayment will help reduce how long you're paying the mortgage for, which has to be a good thing!
So overpay as much as you can afford as long as you have an emergency fund to cover major events such as loss of job, new boiler, car repairs, [s]wanting some shiny bits for your bike[/s] etc.
yep the advise I've been given is to pay off as much as you can as soon as you can. The exact savings are different for each persons circumstances so you'd have to use the calculator above to get an accurate figure.
But where you draw the line on what luxuries you can and can't do with out is up to you. For me going on a couple hols a year or getting some shiney new bike stuff is worth the short term happiness compared to the long term gains of completing my mortgage quicker.
Agree with nixie. Look at how much interest you'll save by getting the mortgage repaid early. Unless you can get a higher rate of interest on your savings after tax than you are paying on your mortgage!
cheers. Confirms my thoughts. That calculator is good and shows huuugggge interest savings. I have savings for emergencies, they wouldnt be added to though if i payed everything into the mortgage.
yep, were overpaying the mortgage by an extra grand a month - for us it will be a big saving