Mortgage Overpayments Explained | Is It Worth It?

[@bea1365]

It is if you know exactly how the system works and use their system against them.

[@MarvinRosario23]

🎯 Key Takeaways for quick navigation: 02:20 💰 Making mortgage overpayments can reduce the mortgage term, save on interest, and potentially exceed savings account returns. 04:20 🛑 Check for early repayment charges and prioritize paying off higher interest debts before considering overpayments. 05:17 💵 Before overpaying, build an emergency fund to avoid financial strain in case of unexpected events. 05:46 🤔 Consider the opportunity cost of overpayments and explore other investment options that may yield higher returns. Made with HARPA AI

[@ozone063]

I took a mortgage at the peak of pandemic a year ago and have fixed it for 5 years; very happy with the rate (1.3) in comparison to today's rates. Should I be looking to overpay or look to invest instead? What's the best strategy

[@samuelewen]

Hi! Thanks for your comment and good to hear you've fixed in before the rate increases! This won't be the response you're looking for (sorry!) but you'd need to speak with a qualified investment adviser to point you in the right direction here. Good luck!

[@AM-zq8ro]

1.3 is a great rate. I have not long fixed at 3.85 (shorter term than you as I would like to move around the end of the term) & even I feel lucky compared to the average 6.45 I saw today on the news

[@samuelewen]

@@AM-zq8ro it’s tough out there at the moment! It was easy to become accustomed to such low rates where they’ve been low for so long. If the monthly payments are comfortable for you (at whatever rate you arrange) that’s the main thing 👍🏻

[@AM-zq8ro]

@@samuelewen I tried the stocks and crypto in 2020/2021. Initially started well and then everything crashed. I am reluctant to invest anymore or in anything else but my own potential future business. My main concern now is what will mortgage rates be like in a few years. No one knows but I think it's best for me to overpay my 10% and cut down my mortgage balance as low impossible just incase. Thanks for your videos BTW.

[@samuelewen]

@@AM-zq8ro very sorry to hear! I wish you all the best with the business. Glad the videos have helped.

[@taggthis]

Mortgage overpayment; such a debate with so many other modes of investment available now, which were non existent years ago! I don’t have enough capacity to follow and keep up to date with stocks and crypto, so I may be best to overpay with my 10% allowance, over saving it in my bank account, but would be interested to know your thoughts and others perspectives, as always open to new ways of thinking!??

[@samuelewen]

Hi Leslie, It sure is a debate! As you mention there's lots of investments that you can consider when banks aren't paying great interest on savings. I'm unable to offer investment advice but I'd definitely recommend doing your research into other options before making overpayments on your mortgage.

[@taggthis]

@@samuelewen thanks, but do you have a personal opinion?

[@pascaljoly5752]

I don’t understand something. I’ve been overpaying my mortgage for many years. But my monthly payment has only come down dur to lower interest rates as I fixed the rate when they were lower than when I took in the loan. So now I’m paying lower amounts due to lower interest rates but the length of my mortgage hasn’t changed. How is this possible? The length should have come down. The person I spoke to at the bank was unable to explain why, which is concerning to me.

[@samuelewen]

Hi 👋🏼 you should have the option to choose to reduce your mortgage term with the overpayments you make (keeping your mortgage payments the same), but it’ll ultimately come down to the terms & conditions of your mortgage. As you remortgage throughout your mortgage term your monthly payments may fluctuate. You could look at the option of reduce your mortgage term completely when you remortgage - might be worth discussing this with your mortgage adviser.

[@Mickimeister]

I'm in the unique position where I have a mortgage with a remaining fixed rate of 1.95%, but also I can open a savings account with higher interest rate. I want to pay my mortgage off as soon as possible - would it be worth investing?

[@samuelewen]

Hey 👋🏼 great to hear you have such a low interest rate! I’m afraid I can’t advise on investments, but if it were me I’d run figures for different scenarios to see what you’re most comfortable with

[@DD-nl7rv]

What's the implication on Credit Score in terms of having a mortgage under your name and being paid off?

[@samuelewen]

Hi, a having a mortgage and keeping up to date with all repayments should hopefully have a positive impact on your credit score over time 👍🏼

[@AntPDC]

Thank you Samuel, very informative indeed and well-presented. I'd just add: "savings account"? Aren't they dead?

[@samuelewen]

Thanks for the feedback! Personally I keep 6 months' worth of expenses in a savings account as an emergency fund and use the rest for investments, but some people prefer to keep more in savings and want to take less risk.

[@METHVS02]

With todays general inflation rates around 10 -11% surely it is not worth making overpayments, when the balance is shrinking in real terms by 10% per year. For example, my new deal is going to be around 6% but inflation is 10%. so I'm still winning by 4%. as long as i can manage the new payment and cashflow in short term why sting myself with paying down a lump sum today. What are your thoughts on this ???

[@samuelewen]

Hi, inflation eroding debt over time is definitely a good point to raise, but you’ll find that some people’s main aim is to reduce their debt as quickly as possible. It’s always worth weighing up all of your options 👍🏻

[@skerriesrockart]

6% on 100k is 600 per month in interest alone..and you're paying it ftom your net income..

[@yt_user_20249]

Thanks for this informative video. I want to do a 10k overpayment before remortgage and I am trying to understand if it's better to reduce my monthly rate or the length of my mortgage, considering I am planning to sell in 2 or 3 years. I cannot find help anywhere. Do you have any advice? Thanks

[@Willrulz2]

Reduce length, reducing monthly rate wont save you any money

[@sHareLBJ]

Can you give me an advice? Is it better to take lets say 100k pounds mortgage with mortgage lasting 10 years, or is it better to take 100k pounds in 15 years mortgage and then pay it off sooner (lets say in 10 years). Thank you!

[@sHareLBJ]

Interest is 2,5 %, no overpayment fee but you can have only 3 overpayment yearly with unlimited amount.

[@samuelewen]

Hi, I wouldn’t be able to give specific advice on this as I don’t have all details needed to advise, but generally speaking it comes down to your preferences. Some people may want a lower committed expenditure each month, so they may opt for the 15 year mortgage term with the option to make overpayments to further reduce the term gradually. The downside to this is that you may pay more in overall interest, particularly if overpayments aren’t made. Others may want to limit the interest payments overall and want to pay the mortgage off faster, in which case the 10 year option may be better suited. There’s no one size fits all when it comes to a mortgage term.

[@sHareLBJ]

@@samuelewen my bank lets me make 3 overpayments per year with no fees. I believe there is no upper limit for overpayment. I think I am going to go with 15 years and then pay off the mortgage faster. Thank you!

[@DougTag8479]

Great video thanks for the info 👍

[@samuelewen]

Glad it was helpful!

[@samuelewen]

Would you overpay on your mortgage?

[@iMrTom163]

I overpay the maximum amount every year

[@samuelewen]

@@iMrTom163 that’s good going! Have you seen a good decrease in your mortgage term?

[@iMrTom163]

@@samuelewen I opted to have the overpayment reduce the monthly amount. This way it allows me to save more each year for the next payment. Once the overpayments don’t make much difference to reductions I will swap to term reducing overpayments. Mortgage was £498 pm and since overpaying it is now £377 pm so I save £120 pm extra towards next year.