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jack w

Mortgage Overpayments

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Hello Everyone, 

I am currently paying very close to my 10% per annum overpayment limit.

I am wondering whether it is sensible to increase my payments and suffer incurring overpayment charges? 

Please advise?

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Have to agree with Julia - You would be better served putting it in something like a S&S ISA, even in something safe like a high-bond based fund e.g. Vanguard Lifestrategy Income fund.

This would outperform the debt on your mortgage, and then when it comes time to remortgage onto a new deal, you can cash out the investments and overpay then when you move mortgage product/lender (or just keep it going until you have enough to pay off the total debt) .


Tommy | Trifecta Properties
Website: www.trifectaproperties.co.uk

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It would make an interesting spreadsheet @jack w ..

You would have to compare the returns from putting the extra cash into say savings.
Compared to the savings of paying mortgage interest on the lower loan compared to a higher loan.

I'm not sure it's as black and white - if we consider Savings Rates are not that great. It would also depend a lot on your mortgage rate if it's high it'd be worth doing the math.

If you have excess personal cashflow, there are often savings elsewhere. The obvious one would be other loans or credit cards, more obscure ones being Paying for Insurance Annually, instead of Monthly for example often means a discount.

Remember when you remortgage. It's an ideal time to pay down your mortgage without any Early Repayment Charges. 

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Compare your current mortgage with the alternative available and also your longer term goals. 

In my situation, my mortgage % is very cheap, and I'm unlikely to get another mortgage of this rate in the future. With my personal goal of building my property portfolio, it seemed better to save the money for future deposits rather than pay down a cheap mortgage, and to refinance down the line at a higher rate. 

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8 hours ago, snookjas said:

For what reason would you want to pay over the 10% and incur unnecessary charges? 

Jase

In 2 years I aim to increase my mortgage with the bank so that I can pay off my Help To Buy loan with the government.

To help reduce the rate of my future mortgage, I am attempting to put as much capital into my property as possible. 

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7 hours ago, TommyG said:

Have to agree with Julia - You would be better served putting it in something like a S&S ISA, even in something safe like a high-bond based fund e.g. Vanguard Lifestrategy Income fund.

This would outperform the debt on your mortgage, and then when it comes time to remortgage onto a new deal, you can cash out the investments and overpay then when you move mortgage product/lender (or just keep it going until you have enough to pay off the total debt) .

Thank you very much for the advise, that makes absolute sense. I already have investments with Vanguard but I will look into the option you suggested thanks!  

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3 hours ago, kent614 said:

Compare your current mortgage with the alternative available and also your longer term goals. 

In my situation, my mortgage % is very cheap, and I'm unlikely to get another mortgage of this rate in the future. With my personal goal of building my property portfolio, it seemed better to save the money for future deposits rather than pay down a cheap mortgage, and to refinance down the line at a higher rate. 

I can see how that is the most feasible approach, thank you so much for your input. I too plan to save for future deposits. 

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If you are looking for a stocks & shares investment to put your money into I recommend Fundsmith - performance every year since launch has been staggering. Set up a regular monthly payment into an ISA and watch it grow .

 

Good luck :) 

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