Overpaying the Mortgage

Today I am playing with the Overpayment (OP) calculator on Money Saving Expert- I love doing this, its amazing how even a tiny OP can make a huge difference to the mortgage!

We currently pay £666.72- I like the 666 number, shame the pennies weren’t 00!

If I were to increase our monthly OPs by £333.28, for example, taking us to £1000 a month, we would save £19,964 in interest over the term of the mortgage, and we would pay the mortgage off 10years and three months earlier. Thats amazing! It would also be a lot of money extra to find to throw at the mortgage…

Even rounding the amount up to £700 a month- £3.28- would see us save £337 in interest and we would pay the mortgage off two months early, this would still be fantastic in the long run! Every penny really does count, and this is based on our fixed rate and the current base rate so this would fluctuate.

I *think* that we might be able to afford to OP 250.28 a month- the 28p is to round it to a whole number, sad I know! Hubby may not agree with this though!Haha. If we were to OP that amount, it would save us £16,742 in interest and we would knock 8 years and 7 months off the mortgage.

Playing with the calculator is addictive, I totally recommend anyone who is considering overpaying has a look at this, it really shows that every penny/pound counts when paying down the mortgage.

My aim is too have a good discussion with hubby and see if he agrees we could start OP the mortgage again, as we used to!

Below is the links to the basic mortgage calculator and the overpayment calculator:

https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

Some ways I have been working towards Mortgage Freedom and things I have noticed!

Just a reminder, I am a Nurse, and in no way should what I say/do be taken as proper advice, I am merely sharing my novice ways of heading towards mortgage freedom! Any financial choices should not be based on my ramblings!

Always look at debts as a whole- if you have expensive debts, the advice would be to pay these off first. For us, the most expensive debt we have is the mortgage. We do have a loan, which is 4%, but this has set interest and we will pay the same amount regardless of how soon we pay it off! The mortgage is at 2.99% and our credit cards are all 0%- we TART our cards to ensure we dont pay any interest on them. This has been working well for us, we currently have a 0% spends card and a 0% balance transfers card. We make note of when these run out to ensure that we don’t get charged interest!

Martin Lewis from MSE (Money Saving Expert), points out that if you can get more from savings than OP (Over Paying) the mortgage, then that would make sense. For some people being MF (Mortgage Free) is the overriding desire- but bear this in mind, your money may work better in other ways. We are saving in a 1.5% current account and have a 5% savings account, there is a cap on this for £250 a month and we can’t touch this for a year to get the interest. As it stands, the mortgage rate is now much better for us, our first mortgage was over 5%! So some savings accounts are better than OP now.

OP my morgage helped when remortgaging, for example, I was able to get a better rate once I hit 10% comparative to 5%LTV. This is the same with other key LTV points, namely 90%, 75% and 60%, though when we most recently remortgaged and hit 80% and this made a big difference to us!

We are only able to OP 10% of our mortgage a year this has always been the case- there isn’t any chance we will reach 10% in a year currently. But as the mortgage decreases, 10% wont be as much, so maybe one day this could be an issue! For our first mortgage, we kept the term as long as possible as it was more affordable, then chucked OPs at the mortgage on top of this. Meaning the outcome is similar to a reduction in years, but we had flexibility with regards to our standard monthly payment being affordable. For our latest remortgage, we could afford the payments over 26years, shaving years off the mortgage. We then plan to OP on top of this when possible.

We have had a great mortgage advisor. I look on Money Saving Expert as well to see the kind of costs we would be looking at, and she always gets us a great deal. Having an expert you can trust is definately helpful, she was very impressed at how much we had taken off the mortgage! The second time we remortgaged, we did it by ourselves with the same bank- the deal was fine and incured no fees. When we were looking at remortgaging with another bank and a different term, I let Fiona lead the way!

When we first got our big mortgage, paying it down was the most important thing. I knew in the long run we would thank ourselves for two years of frugality in other areas when we could remortgage and the house would be a lot more affordable. Now, in theory, we can afford the house and bills with one wage, which is reassuring! I have been reading about mortgage neutrality recently, but we have other things to save for and do now, so OP the mortgage when we can fits better these days!

Remember, with OP, every penny/pound counts! For every pound borrowed we pay £1.51 back therefore everytime you pay off an extra £1, you save 51p in the future! That’s a motivating thought! A diary on MSE introduced me to Tilly Tidies- namely someone called Tilly, started to skim down their accounts. Rounding down to a whole number, what was skimmed was then OP or sent to a savings account to build up to be OPayed! This is something I am doing now as I have to save £1000 before I can send an OP, I am also considering setting up a regular overpayment again… get itchy not seeing any extra change to the mortgage!

WARNING- Mortgage overpayments can be seriously addictive and cause others in your lifes eyes to glaze over! Find other like minded folk to share with 🙂