Over payment of SVR mortgage
 

I have a mortgage with Halifax which is currently approx £381 a month. I was thinking when I'm out my time as an apprentice in September, pending further interest rate hikes (current SVR is 3.99%), I'd like to overpay the mortgage, even by say £20-30 a month. I know this isn't a massive amount in the grand scheme of things but I was wondering would that £20-30 come off the outstanding balance or be sucked up by interest? The balance is circa £82,500 IIRC.

I could probably find out by going to town and speaking to them but I'd like to know what others have done with the benefits :)

Thanks

overpay, overpay, overpay,

I started overpaying £500 mth 2 years in to a 35 year mortgage, I am on track to pay off my mortgage with in about 13 years from start instead of 35, every penny helps!

Every time the Bank recalculates the principal, less of the over payment will go to interest and more to capital. This used to be once per year, but now many do this monthly so it can really accelerate your repayment quite nicely.

There is little downside other than less money in your pocket, so if you can afford it, do it. Overpayment does not incur early repayment fees which saving the money and paying it off in lumps would do.

£30 is going to a save you about £6k and almost 3 years early repayment.

I dont know if I would call that value for money myself. Depends how much you need the £30. Its going to take a long time for it to have any impact. If you could over pay more now - then stop over paying later because funds are needed for other things you are still going to see a fairly reasonable benefit. However, if you pay £30 extra for the next couple of years then stop its not going to make much difference in the long run and its cost you £30 more a month - IYSWIM.

For me, IMHO, I would say £100 would be the min I would over pay. HTH.

Thanks guys. Come September I'll have a pay rise, maybe £100-200 p/m as I'll be on 90% base craft earnings. With a young family and the bloody Subaru I doubt I could afford £100 extra, but if overtime is there its an option. This is the purpose of this thread, just to check out my options. Would that hypothetical £30 be better put into a savings account for my son for a few years then? You can probably tell I'm looking to see what makes my small monies work the hardest for most gains?

Sell the Subaru and get a diesel , the money you save put towards the mOrtgage :D

Don't swear at me young man :D

It's my small pleasure and I like fiddling with it.

In which case I would put the £30 away each month and then use it when you see fit. Things might change, and you might need that cash for something - or on the other hand you might be able to pay much more - but whilst you are unsure I would stick with the safe bet. Also - keeping in mind if your interest rate goes up at any time etc etc. :thumb:

But what about the car? :D

It's an interesting one and perhaps not as straightforward as it first seems.

You have to take into account the effects of inflation which could massively erode your debt. So in 30 years time that £85k might be the price of a small car or a years wages for you. Some people have gambled on this and hence why take out interest only mortgages with a view to only paying back the capital sum after 30 years when in real terms it might be a lot smaller.

But thinking that deeply into it can give you brain ache! The reality is for most people it is better to overpay, I would as I'm generally risk averse.

The simple maths you need to do is could you invest that extra £x/month and make more than the interest you would save? The answer for most of us is NO and so its better to overpay the mortgage.

Even if you can only over pay £30/month I'd say go for it straight away. At least then you'll get used to not having that £30 and so it'll be easier to bump that up to £50 or £100 when the time is right.

All imho of course and dyor!