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With a more than likely HPC upcoming in the UK in the next few years, what are peoples views of overpaying the mortgages whilst there being low interest rates?

I understand that most people will see it as a waste of money, as the arguement of investing in stocks / gold / bitcoin etc, but with the potential of lots of jobs going, is it worth overpaying now (after you have an emergency fund of approx 6 months salary saved) given the uncertainty of investments in future? 

 

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37 minutes ago, sPinwheel said:

Overpayment not only helps reduce the overall cost, it also gets you out of debt faster. IMO getting out of debt gives you more freedom than being a slave to your paycheck writers..

+1   How many people really understand this?

Too many see paying down today's debt as a way of loading up tomorrow.

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When the interest rate is higher than currency inflation, it makes sense to overpay. If inflation is greater than the debt then it is effectively eroding the debt away, when it is better to invest/save any spare cash into something that can yield a return greater than the debt interest and preferably greater than the currency inflation.

Also, if you can keep such investments liquid then you can pay down the debt should the situation reverse and you have the flexibility to divert the investment into anything you like at any time in the future. Once you paid the money back to the lender it's gone, unless you decide to refinance more debt, which is likely to be at a higher interest rate.

Worth considering though.

Edited by DarkHorseWaits-NoMore
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With rates as low as they are, we are saving rather than overpaying. Having a nice lump on money motivates us to keep saving more each month and it gives you more options. Ie. If we overpay, who says the banks will lend us it back again in the future? 

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Overpay until you reach your lowest rate (60% LTV). What matters is your net: assets - debts. So unless you can't trust yourself if you hold extra cash it becomes useless to overpay, and could leave you in a bad situation if you suddenly needed that cash for whatever reason life throws at you. 

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I over paid hugely from 2012 to 2018 - knowing what I know now, I would have been far better off either investing in FAANG (Facebook, Apple, Amazon Netflix Google) who were on my list to invest in. Or even just a ftse tracker. If I'd done that I would have been loads better off. But that is with hindsight - at the time paying down a mortgage felt comfortable and safe - and means I have a reasonable mortgage now and the house I hope to be in for a good while. But still gutted I didn't invest, but will we ever see another stock market like the last 10 years for shares? I'd say a good 6 months before the stock market has any long term universal positive rise. And that is assuming that covid 'goes' and that loads of companies don't go bust... I think they will! Sara is closing 1400 store and H&M haven't paid their rent since March - the highstreet along is going to be decimated. 

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Anybody who is entitled to 40% tax relief on pension contributions should be using this to the full in my opinion, it is the most tax efficient method of getting hold of your own salary and this will surely be taken away at some point.

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Ah yes that reminded me! Above that was an interest only mortgage from 2008 to 2018 when I sold. So the over payments were needed (but maybe not quite to the level I did). Was an amazing interest rate! 

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On 05/06/2020 at 22:41, Voltron said:

With a more than likely HPC upcoming in the UK in the next few years, what are peoples views of overpaying the mortgages whilst there being low interest rates?

I understand that most people will see it as a waste of money, as the arguement of investing in stocks / gold / bitcoin etc, but with the potential of lots of jobs going, is it worth overpaying now (after you have an emergency fund of approx 6 months salary saved) given the uncertainty of investments in future? 

 

Why not do a bit of both?

That’s what I do.  

No one is entirely clairvoyant about investments so diversifying by doing a little bit of a range of sensible things, rather than betting all your money on one, had a lot of appeal.

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On 05/06/2020 at 22:41, Voltron said:

With a more than likely HPC upcoming in the UK in the next few years, what are peoples views of overpaying the mortgages whilst there being low interest rates?

I understand that most people will see it as a waste of money, as the arguement of investing in stocks / gold / bitcoin etc, but with the potential of lots of jobs going, is it worth overpaying now (after you have an emergency fund of approx 6 months salary saved) given the uncertainty of investments in future? 

 

Definitely. The house price crash will increase LTVs when it comes to remortgaging.

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Overpaying is something I’ve thought about a lot. I managed to double-pay my monthly amount when I had more disposable cash. It’s harder to justify now but I still put a token amount in each month.

Looking back I definitely over did it and didn’t consider diversifying my assets. 

I love the thought of freedom but the bills will still be there when the mortgage is gone. 

 

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28 minutes ago, scottbeard said:

Why not do a bit of both?

That’s what I do.  

No one is entirely clairvoyant about investments so diversifying by doing a little bit of a range of sensible things, rather than betting all your money on one, had a lot of appeal.

That’s my thinking too. Eggs / basket etc.. We fill the ISA, pensions and so on and also chip away at the debt.
 

We’re also planning on using the money we’re not spending in lockdown (ie: on entertainment) to overpay our mortgage more than normal.

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16 hours ago, sPinwheel said:

Overpayment not only helps reduce the overall cost, it also gets you out of debt faster. IMO getting out of debt gives you more freedom than being a slave to your paycheck writers..

+100

Looking at the money that's been slashed into households dep the US, you can expect an uptick in inflation.

Only hedge is dont borrow too much, go for a low ling fix - 5 years. And overpay whilst you can.

I almost complete as 5 year fix from HSBC. Stupid low apr - under 2%. Overpaid 2x during first 3 years. Now I've dropped back to the original payment. I'm now paying ~3% off each month. 

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Over paying reduces your LTV and this will give you a wider choice of lenders in future. Interest rates are low but banks add fees on upfront which do vary. 

I was a serial overpayer, and once you below a certain LTV lenders standard variable became cheaper than 2/3/5 year deals when fees are included and there are less restrictions on over and under payments then too.

If youre undecided about overpay Vs investments you could split what you put your spare cash too 50/50 and hedge the outcome.

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1 hour ago, spyguy said:

+100

Looking at the money that's been slashed into households dep the US, you can expect an uptick in inflation.

Only hedge is dont borrow too much, go for a low ling fix - 5 years. And overpay whilst you can.

I almost complete as 5 year fix from HSBC. Stupid low apr - under 2%. Overpaid 2x during first 3 years. Now I've dropped back to the original payment. I'm now paying ~3% off each month. 

 

14 hours ago, scottbeard said:

Why not do a bit of both?

That’s what I do.  

No one is entirely clairvoyant about investments so diversifying by doing a little bit of a range of sensible things, rather than betting all your money on one, had a lot of appeal.

Two of my favourite posters on here and you must be clairvoyants ? I sit down every Saturday and fill in the family wealth balance sheet. Constructed like my company one and any balance sheet most liquid at the top (cash) least liquid property, own company worth at the bottom. 

My assets are diversified in shares/bonds  etc and across continents and held in Isa's/pension and a shares account and gold, cash etc . Owned vehicles are in there aggressively depreciated below market value as is my house equity. Sold a motorbike and had some spare cash. Was going though EXACTLY the thought process on this thread.

I have a  mortgage at 1.7% which i can overpay 10% a year which is about 35% of the house value. I have a good proportion of that in cash (pre covid I though a bit high its a reasonable 6 figure sum) now glad I did.

I could put all the cash against the mortgage but at 58 its a good deal and now minimising my tax bill so if I pay off will I be able to show enough income to get another one ? should be done and  dusted at 70 so not worried then.

So split the cash £9k 5 ways some off the mortgage and Microsoft.Tesla,Ocado and Netflix into the isa.  Pulling money out of rate setter ( might not see that I think they are becoming illiquid.....)so will go through the process again soon if they stay afloat.

Inflation will mean that the debt is eroded I have set my payment at around a £600 month contribution to the capital so over the remaining years will have paid a £100k back anyway not to do that would be reckless.

Careful vehicle  buying for me makes a difference my 2016 Golf GTE has gone up in value, sold 3 new bikes with low miles for a 10-15% profit (thats where cash comes in you can get good discounts for buying in bulk) 

Looking at the spreadsheet a year ago I am up about £40k which in the current climate I will take and as good as any testament to diversifying as much as you can.

 

 

Edited by GregBowman
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On 6/5/2020 at 10:41 PM, Voltron said:

With a more than likely HPC upcoming in the UK in the next few years, what are peoples views of overpaying the mortgages whilst there being low interest rates?

I understand that most people will see it as a waste of money, as the arguement of investing in stocks / gold / bitcoin etc, but with the potential of lots of jobs going, is it worth overpaying now (after you have an emergency fund of approx 6 months salary saved) given the uncertainty of investments in future? 

 

I overpayed my mortage to finish in under 5 years. 

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  • 415 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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