Overpay mortgage vs savings

[@battyjoe]

I am a pilot and was made redundant in COVID. It took me 18 months to get a new job. Thank god I had a good emergency fund.

[@bogdanrusu4067]

18 months to get a new job AS A PILOT. Please correct me if I'm wrong.

[@TheCompoundingInvestor]

Started investing in the FTSE 100 as a teenager with pocket money and part time jobs. Then several years later sold the lot to put a deposit on a house. I threw everything I could at the mortgage to get rid of it and live very frugally. Then in 2009 it was finally paid off and I went back to investing again in the FTSE 100. Now mortgage free and bringing in £1000 in dividend passive income which of course keeps growing because I reinvest the dividends and let it compound over time.

[@PRINCESSGEMINI1987]

This is my dream, I will definitely check out your channel for tips. Well done 👏🏾

[@stevenclarke1737]

Wish I had the confidence and the know how to do the same. So sticky to swapping banks and moving money to the highest interest

[@masteringersoll]

If your bank gives you trouble free access to your overpayments as mine does, I just overpay and they tell me I can pull it at any time. I can overpay 20% and have full access to the money any time. It is my emergency fund and reduces principle at the same time. If your bank offers this, the solution is clear. People should explore this option

[@dancullen177]

I’ve just fixed my mortgage for 5 years Andy, and I’m doing a kind of over payment simulation. I’m putting the money into a savings account and seeing where we go with interest rates? The mortgage isn’t inflating by 10% per annum and now it’s fixed neither are the repayments, and if interest rates rise to much over the 5 years my plan is to pay of a large chunk at the end of the fixed term. I feel just the threat of large interest rate rises could slow consumer inflation & asset inflation and if prices go to high people will just stop spending and investing which will force prices to fall or flat line, and where the inflation story is hot on the press I think most people are already cutting back on spending, sorry to tangent of subject a bit. All the best Andy keep up the good work 👍🏻

[@nickyaustin4446]

If you overpay you can generally take payment holidays when needed which is sort of the same as an emergency fund.

[@travellingtom6091]

Make sure this isn't reflected in your payment record. I don't know if it is.

[@melvinb7160]

Hey Andy: I have more savings than my 20K mortgage. My 1.8% fixed offset deal finishes March 2023. Should I pay off my mortgage or take out another off set but of course at around 5%? Advice?

[@reggie2962]

Hi Andy! I'll be headed to uni in September and would love to see from you a video on advice for young people who are becoming independent for the first time. It could be about things like student loans, first credit accounts, or general money saving tips to make the student life easier. Personally, I have been trying to decide whether I should get a student loan or not, since I have enough money from inheritance to pay for my studies, but I don't like the idea that I'll be spending most of it during my 4 year course. Of course it's up to you if you think this would make a good video. Thanks

[@jesusrevus8017]

Don’t worry about student loans. You won’t notice it coming out your wage when you get a job. If you do notice it, it’ll be because your earning a decent amount anyway so it won’t really bother you. Plenty of rice, pasta based meals are really cheap- especially buying big bags of each, tinned lentils, different types of beans. You’ll be able to make loads of cheap easy Italian and Mexican food which tastes great.

[@times7171]

Hi Andy. Just wanted to thank you for your video's. During the past 12 months I have earned just under £500 with bank switching, Amex & Chase cash back. Prior to watching your video's it was something I never looked into. So a massive thumbs up from me.

[@winniethepoohandeeyore2]

I over pay my mortgage as well as building savings

[@delsmith7725]

Brilliant advice Andy. Thank you.

[@Major_Positive]

Hey, Halifax offer 4.5% on a 12 months locked savings, £250 deposit per month. 👍 Also, monzo have great savings.

[@PabloTBrave]

When over paying don't change the mortgage term , just over pay .

[@PabloTBrave]

@Afifa Ahmad me too but reducing the term is risky a) you are technically re negotiating the loan and b ) things change later down the line you will have renegotiate the extra payments off , for simpler just to overpay

[@Jay1mm]

Great video. Could you do one vs. investing in an index fund?

[@inatehex]

Great video, as usual!

[@MrDark21knight]

Skip savings, overpay the mortgage

[@minimad8793]

cheers Andy, another straight talking video.

[@MrDark21knight]

I threw all my savings and 401K to reduce my mortgage $58500

[@pseudocode6506]

I'm not convinced by this. If you overpay £1000 today, with a 2.5% over 25 years you'd pay £1000 now instead of £1345.85 over 25 years. But, you're paying £1000 in today's money to reduce the term at the end of the mortgage. In 25 years that £1000 is going to be worth less, when the inflation rate is greater than your mortgage rate, you're spending more in real terms by paying today instead of in future. You're spending more in real terms by overpaying. The same thing applies to savings, they devalue over time but a mortgage effectively lets you borrow money from yourself in the future when each pound has less value. Imagine giving yourself £10,000 25 years ago, that £10,000 would go a lot further. By overpaying you are using say £1000 of pounds as they are valued today so that you do not have to pay £1000 at 2050s value in real terms. You are basically doing an incredibly poor currency exchange. You are spending £1000 at the value of the pound today, when you could spend that £1000 in 25 years when it might only be worth £500 in today's money.

[@oakiediaries9907]

Great outlook

[@LawrenceTimme]

You are assuming inflation will continue forever tho. If everything goes wrong or you hit deflation then it's always better to own the roof over your head. Also once you've paid it off and are safe you can focus more on investing rather than saving in a low interest account and if it goes wrong you never lose as you've already got your house.

[@amirkarim2307]

It is a very good observation, but my only comment would be the fact that inflation is linked to interest rates. Therefore it's swings and roundabouts, because not paying now means you still end up paying more in interest if inflation increases with a plan to have held onto money as long as possible.

[@rosemarie-karma]

With interest rates going up till you can't afford your mortgage, is it worth it? Banks are starting to collapse so no point having savings because you'll loose it with the Bail in

[@nota8386]

I can get my overpayment back anytime from Nationwide.Also, inflation is eating away at the value of my savings all the time.

[@travellingtom6091]

Inflation also erodes debt at the same rate, so this is a moot point.

[@nota8386]

@@travellingtom6091 the difference is that inflation is eroding something I own, is my savings as opposed to something I owe is mortgage.

[@travellingtom6091]

@@nota8386 Exact same thing I'm afraid.

[@magnus9701]

you should tell people if paying off mortgages don't. pay it all all off, leave at least £1 in it so lenders still has a say in it , eg house in joint names partner gives away their half ,the other partner does not know they have done it ,this is legal ,but if lender involved they got to tell joint owner . I know because it happened to me £350,000 lost

[@sheraziqbal9556]

What?

[@magnus9701]

@@sheraziqbal9556 thats right ,and its legal

[@thaubuwaqas564]

I don’t know if this is a silly question but is it better to make overpayments when you have a fixed low interest rate or when interest rate go up? Because I thought it you have a low rate then you’re paying less interest and when rates go up then it’s better to make overpayments as it’s costing you more to borrow? Does anyone know? Thanks

[@jackholmes7521]

If you have a low fixed mortgage rate, invest your money or put it in a good savings account (>4.5%). When your fixed mortgage rate ends, then it might make sense to make a lump payment depending on the interest rate (say ~6%)

[@christopherhubbard602]

What happens if someone as paid off these mortgage

[@battyjoe]

Put it into emergency fund, pension, investments (good time now to buy cheaply and average down hopefully) and savings.

[@alangordon3283]

The Mortgage is paid off 🤷‍♂️

[@Tiredmum]

0% tax payer is up to 5k in interest

[@barnoluk9272]

No it isn’t. It’s £17k

[@Tiredmum]

@@barnoluk9272 you can earn upto 5k of interest on your savings if you are a 0% tax payer

[@Tiredmum]

@@barnoluk9272 for your PSA

[@barnoluk9272]

@@Tiredmum it depends how much you actually earn not your rate. If you earn £0 in a year then you also get your entire £12.5k tax free allowance as well as your £5k starting rate of saving

[@Tiredmum]

@@barnoluk9272 but it depends on your incame. If you earn £0 then its 5k but max interest you can earn through wages and interest before tax tops out at 17570 iirc

[@dave9456]

Mortgage's suck Fine if you want to leave something to people in your will, apart from that steer well clear, there's a lot of gold diggers out there, sorry to be so negative