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Mortgage advice?


Barry Sanchez
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We overpay ours in a lump sum every 3 months which works at about £4,500 a year, this has taken the monthly amount down but the length of the loan is still 20 years! We shall now pay it monthly on a direct debit alongside the mortgage every month as it would seem to bring down the length of the loan, have I thrown £4,500 away? Or has it simply taken off a small amount per month over the length of the mortgage?

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I overpaid my mortgage over a few years and it was the best thing I ever did. I chose to keep my monthly payments the same but it meant that the mortgage would have been paid off earlier. Any work bonus or payout always went into my mortgage, and the length of term just came down each time.

 

Living mortgage free :smug:

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We overpay ours in a lump sum every 3 months which works at about £4,500 a year, this has taken the monthly amount down but the length of the loan is still 20 years! We shall now pay it monthly on a direct debit alongside the mortgage every month as it would seem to bring g down the length of the loan, have I thrown £4,500 away? Or has it simply taken off a small amiunt per month over the length of thd mortgage?

 

It's not been wasted. You've reduced the loan but presumably you've taken the option of keeping the term the same length which is why the monthly payments have gone down. If you speak to your mortgage people they should explain to you your options. Basically, the longer the period over which you pay off the loan then the more interest you will pay in total.

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We made our mortgage payments every week, instead of four times per month - 52 payments per year, instead of 48. Significant saving in interest over the life of the mortgage.

 

We've paid off our house - great feeling. And one year left on a two-year loan for the new car. Then I'm completely debt-free. Nice!

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They have basically said we have two options, lump sums up to £10,000 a year or monthly direct debit alongside the mortgage, I am going for the monthly now as it seems to take off the amount of the loan whilst keeping the mortgage the same so in turn reducing the length of the mortgage and not the amount we pay every month, or I hope so:lol:

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We made our mortgage payments every week, instead of four times per month - 52 payments per year, instead of 48. Significant saving in interest over the life of the mortgage.

 

We've paid off our house - great feeling. And one year left on a two-year loan for the new car. Then I'm completely debt-free. Nice!

We are moving this year but want to continue overpaying when we find and buy our new house as well, no debt for me other than a mortgsge but its about to rise considerably ha ha!

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They have basically said we have two options, lump sums up to £10,000 a year or monthly direct debit alongside the mortgage, I am going for the monthly now as it seems to take off the amount of the loan whilst keeping the mortgage the same so in turn reducing the length of the mortgage and not the amount we pay every month, or I hope so:lol:

 

It should reduce the length. As long as you've made it clear that you want the extra payments to come straight off the capital loan. I don't think it's the case now but many years ago some mortgage lenders would just tuck the extra payments somewhere safe and only do the recalculations once a year. If you're mathematically minded I can PM you the formula for interest rate, capital and repayments. It's basically a summation of a geometric series.

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definitely preferable to keep monthly payments the same. The length doesn't have to show as reduced but can clearly calculate when you owe nothing which will inevitably be sooner.

Each month that payment will be paying a larger % of the equity and less interest as well.

I don't bother saving anymore just overpay and call back if ever need a lump sum. Nationwide have the money back to you in a week.

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F*** me, just by paying 10% extra a month (we have to do it in a yearly lump sum unfortunately), we will save £50k in interest alone. That, my friends, is mental.

 

That's unusual and unfortunate, a lot of providers let you pay off lump sums up to an annual limit. Still probably worth putting some away every month and not touching it for a year. You're quite right though, early repayment of some capital can drastically reduce the interest paid.

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I was mortgage free by 38

 

The easiest way for me was to pay a fixed amount each month regardless of what the bank thought the monthly amount should be

 

If you want to see the benefit of over payments, use this calculator

 

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

 

Yes I have used that, its amazing to see, after this year though will see if we can continue as well are buying a house here in Liverpool for sort of insurance purposes, we will probably be overseas in the next few years or so so want to get a nice house here to rent out and have for or if any reason we come back.

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True, but I still pay more than the average mortgage repayment (for where I live) and the house isn't and never will be mine.

 

I know that feeling, and its rubbish but hang in there. 12 months ago I was basically insolvent, paying a fortune to live in a box. and now I'm on the verge of starting my first ever mortgage in the next few weeks. Keep the faith, you never know what can happen in life and your time will come eventually. I was surprised at how easy it is to get a mortgage again now

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True, but I still pay more than the average mortgage repayment (for where I live) and the house isn't and never will be mine.

 

I’m sure it’s no consolation, but people with mortgages don’t really own their houses – they need only default on their repayments for 6 months or so to find out who does.

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I know that feeling, and its rubbish but hang in there. 12 months ago I was basically insolvent, paying a fortune to live in a box. and now I'm on the verge of starting my first ever mortgage in the next few weeks. Keep the faith, you never know what can happen in life and your time will come eventually. I was surprised at how easy it is to get a mortgage again now

 

I’m sure it’s no consolation, but people with mortgages don’t really own their houses – they need only default on their repayments for 6 months or so to find out who does.

 

Thanks guys, these have both cheered me up.

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I’m sure it’s no consolation, but people with mortgages don’t really own their houses – they need only default on their repayments for 6 months or so to find out who does.

 

Anybody who has a mortgage and thinks that own that house is a fool, same with a car loan though. The trick in this though and its not particularly shrewd is to continue payments of your said mortgage and hey presto after 25 years or less or a bit more its yours.

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True, but I still pay more than the average mortgage repayment (for where I live) and the house isn't and never will be mine.

 

But you choose to live in the greatest City on Earth, not owning a house and paying extortionate rents for a box in you shall never own is a small price to pay.

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But you choose to live in the greatest City on Earth, not owning a house and paying extortionate rents for a box in you shall never own is a small price to pay.

 

Didn't really have a choice. I lived in Leeds, but was unemployed and getting into stupid amounts of debt, plus the stress was really exacerbating some previous illnesses.

 

I was applying for jobs all over the country, I'd have gone wherever the work was - which happened to be London.

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I’m sure it’s no consolation, but people with mortgages don’t really own their houses – they need only default on their repayments for 6 months or so to find out who does.

 

True, but if house values rise then your equity in the property will increase but the loan stays the same (or reduces gradually, at first).

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This is why ever since my daughter was born all the child benefit payments have gone straight into a savings account for her. She's 14 now and will have a tidy sum by the time she is looking for her first house, enough to put down the deposit.

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What interest rate are you paying?

You could invest that money and get

5.5-8% in corporate bonds. (Investment grade, provident 7.0 &7.5, Halifax 9 3/4% bg transco etc)

If your interest rate was low you could have extra cash for retirement.

 

 

Or you could buy shares. Or buy funds.

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This is why ever since my daughter was born all the child benefit payments have gone straight into a savings account for her. She's 14 now and will have a tidy sum by the time she is looking for her first house, enough to put down the deposit.

 

We don't get them for our daughter, which is annoying, but I suppose that's for the greater good of the country.

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