Since when overpaying on a repayment mortgage, all the overpayment goes towards reducing the capital loan and not paying any interesting, would it be clever with your cash to extend the term, to reduce the monthly payments and use the extra cash to overpay the capital loan? Extending the loan would add more interest over time but overpaying monthly to reduce the capital loan, wouldn't it pay it off quicker, would it?
No one has a crystal ball seeing the future, imo everyone should try to pay extra, even a nominal £100-£200 can reduce the term. Mortgage is a noose, clearing it should be a priority, the quicker its cleared the quicker the dd can be cancelled to enjoy life
Why always reduce the mortgage term? I chose to reduce monthly payments instead, to reduce the impact of interest rates rises on my ability to repay higher monthly payments in future. With the intention to pay off the mortgage early by doing that many times over the years. As it turned out, my circumstances allowed me to overpay to the extent that allowed me to pay off the mortgage completely - many years before the term. But it was nice to get those monthly payments down low and know I could handle interest rises if things had been different
This is simple to explain another way. In 25 years, you pay back 6x (or more!) what you borrow. Every £1 you overpay soon saves you £5 over the term, which reduces the longer you leave it. Keeping that in mind is critical to wealth in mid-life.
I'm overpaying quite heavily with a view to paying it all of by June 2025. I'm also saving and investing and I know the maths doesn't support what I'm doing but I want the house paid off.
Once you’ve paid it off then if you are made redundant they can’t take it off you. It feels great. Then you’re free to invest the monthly payment in to a stocks and shares ISA or cash isa if you don’t fancy the risk. That’s exactly what I did. If you’ve paid off your mortgage then make sure you sign up to the alert system on the land registry. Then if someone tries to take a mortgage out on your property you get an email alert. If you are signing up to a stocks and shares ISA then trading 212 is pretty good and what I use.
Our mortgage is with NatWest who allowed a 10% overpayment every year. As our mortgage rate is only 1.93% we overpaid until savings rates were better. We will pay our mortgage off in Jan 25. 11 years early and probably saved £60k+ interest. NatWest now allow 20% repayments now but we're better of saving as our mortgage rate is very low.
My thinking process. My mortgage if for example is fixed at 4.00 for 5 years . As long as I am able to get a return of 4% on my savings I am better of building the savings and paying the additional amount at the end of the 5 years term if the interest rate proposition is negative. S&P500 ETF pays higher returns than that. (Yes there is risk involved in it). Holding it via ISA
Great video with a few caveats (apologies if you covered them): Before paying down your mortgage, even with an interest rate difference to a savings account, just make sure you've got an emergency fund - once you've made the payment, your roof will go, your stove will break, etc. Guaranteed. Also, before paying down high rate debt (vs the mortgage) you have to ask yourself "Is this debt the result of an event, or the result of a habit?". There's no point paying down a credit card only to rack it back up again because it finances vacations, luxuries, etc. I've seen enough people refinance mortgages to pay out credit cards only to go out and make the same lifestyle mistakes again.
Complete newbie - I hear about remortgaging at the end of your fixed term to get the best rate, but what fees are associated with it? Is it the same process as shopping for an internet provider, simple and straightforward?
is it worth when nearing the end of your mortgage keeping a nominal amount on the mortgage like £1 or even £10 left make it easier to re-mortgage if ever needed?
Make overpayment if you can . No matter how little. Aim to halve your term , so 13 instead of 28 years. It gets better. The more you overpay, the more you can reduce your monthly payments, yet keep the amount you were paying monthly plus your overpayment and voila you are nearly there to completely pay off much much faster. Just keep to the monthly payments you are paying, plus your overpayments .
still on 1.63% rate and so both overpaying and saving to get to a point to pay off, potentially 11years early from a 25 year term. Question is do I use invested money to clear the balance 🤔🤔
Business and people go bump when they have no cash, so always have an emergency fund…. Years ago people said 3 months emergency fund, nowadays I hear, you should keep two years of expenses in savings…. You have to decide your level of risk… Hope this helps….
You are reducing the balance you owe. Log into your mortgage account and you should have a overpayment calculator where you can play around with different overpayment amounts & you will be surprised how much interest you will save..
If your mortgage is your only debt, then paying down the capital on your mortgage is the equivalent of an investment with a guaranteed return
Since when overpaying on a repayment mortgage, all the overpayment goes towards reducing the capital loan and not paying any interesting, would it be clever with your cash to extend the term, to reduce the monthly payments and use the extra cash to overpay the capital loan? Extending the loan would add more interest over time but overpaying monthly to reduce the capital loan, wouldn't it pay it off quicker, would it?
No one has a crystal ball seeing the future, imo everyone should try to pay extra, even a nominal £100-£200 can reduce the term. Mortgage is a noose, clearing it should be a priority, the quicker its cleared the quicker the dd can be cancelled to enjoy life
Why always reduce the mortgage term? I chose to reduce monthly payments instead, to reduce the impact of interest rates rises on my ability to repay higher monthly payments in future. With the intention to pay off the mortgage early by doing that many times over the years.
As it turned out, my circumstances allowed me to overpay to the extent that allowed me to pay off the mortgage completely - many years before the term. But it was nice to get those monthly payments down low and know I could handle interest rises if things had been different
Well done for paying it off early it's a great feeling when you know that DD is not going have to go out the next month
Exactly what I did too 🎉 it annoys me when people give such a black and white answer as though it’s the only option !
This is simple to explain another way.
In 25 years, you pay back 6x (or more!) what you borrow.
Every £1 you overpay soon saves you £5 over the term, which reduces the longer you leave it.
Keeping that in mind is critical to wealth in mid-life.
I'm overpaying quite heavily with a view to paying it all of by June 2025. I'm also saving and investing and I know the maths doesn't support what I'm doing but I want the house paid off.
Once you’ve paid it off then if you are made redundant they can’t take it off you. It feels great. Then you’re free to invest the monthly payment in to a stocks and shares ISA or cash isa if you don’t fancy the risk.
That’s exactly what I did.
If you’ve paid off your mortgage then make sure you sign up to the alert system on the land registry. Then if someone tries to take a mortgage out on your property you get an email alert.
If you are signing up to a stocks and shares ISA then trading 212 is pretty good and what I use.
Our mortgage is with NatWest who allowed a 10% overpayment every year. As our mortgage rate is only 1.93% we overpaid until savings rates were better. We will pay our mortgage off in Jan 25. 11 years early and probably saved £60k+ interest. NatWest now allow 20% repayments now but we're better of saving as our mortgage rate is very low.
People in the uk are crazy no one talks about investing. That’s why you’re all screwed
My thinking process.
My mortgage if for example is fixed at 4.00 for 5 years .
As long as I am able to get a return of 4% on my savings I am better of building the savings and paying the additional amount at the end of the 5 years term if the interest rate proposition is negative.
S&P500 ETF pays higher returns than that. (Yes there is risk involved in it). Holding it via ISA
Great video with a few caveats (apologies if you covered them): Before paying down your mortgage, even with an interest rate difference to a savings account, just make sure you've got an emergency fund - once you've made the payment, your roof will go, your stove will break, etc. Guaranteed. Also, before paying down high rate debt (vs the mortgage) you have to ask yourself "Is this debt the result of an event, or the result of a habit?". There's no point paying down a credit card only to rack it back up again because it finances vacations, luxuries, etc. I've seen enough people refinance mortgages to pay out credit cards only to go out and make the same lifestyle mistakes again.
It's a great feeling when you pay it off
What happens if you pay more than 10%
There is a penalty charge.
Unless your mortgage provider allows more than 10% per year like NatWest in UK that allows maximum 20% overpayment per year.
Complete newbie - I hear about remortgaging at the end of your fixed term to get the best rate, but what fees are associated with it? Is it the same process as shopping for an internet provider, simple and straightforward?
One more payment to go in 2 weeks I cant wait!!!.If you can you need to overpay your mortgage ots that simple.
is it worth when nearing the end of your mortgage keeping a nominal amount on the mortgage like £1 or even £10 left make it easier to re-mortgage if ever needed?
Thanks for a previous video where you talked about Barclay's changes on Blue Rewards/Rainy Day savers.
If you have a buy to let mortgage if you over pay on it would you have to pay more tax
£269,000 mortgage. 28 years left. Want to retire in 20 years time (if I survive). Can I do it?
Make overpayment if you can . No matter how little. Aim to halve your term , so 13 instead of 28 years. It gets better. The more you overpay, the more you can reduce your monthly payments, yet keep the amount you were paying monthly plus your overpayment and voila you are nearly there to completely pay off much much faster. Just keep to the monthly payments you are paying, plus your overpayments .
still on 1.63% rate and so both overpaying and saving to get to a point to pay off, potentially 11years early from a 25 year term. Question is do I use invested money to clear the balance 🤔🤔
Business and people go bump when they have no cash, so always have an emergency fund…. Years ago people said 3 months emergency fund, nowadays I hear, you should keep two years of expenses in savings….
You have to decide your level of risk…
Hope this helps….
What happens if you overpay your mortgage but when you sell the value of your home went down? What happens to those overpayments?
You are reducing the balance you owe. Log into your mortgage account and you should have a overpayment calculator where you can play around with different overpayment amounts & you will be surprised how much interest you will save..