Reply to: Overpay the mortgage VS saving

[Freelancer Financials]

I had one that was 4% with RBS when the normal rates were about 2.5% so wasnt bad but they didn't alter it when the rates got chopped so got out. I'd be interested to see what the situation is as well.

That's correct, they still have an offset which tracks their SVR at 4%, so nothing has changed. They're not competitive and rely on borrowers not looking around.

[Freelancer Financials]

The ones I've seen tend to just be SVR with the offset element tacked on.

Not the case, there are many competitive offset rates that track the Bank base rate and also fixed rates.

[Freelancer Financials]

has the offset mortgage rate come close to repayment yet?

You mean a standard mortgage, not repayment as you can get Offsets that are repayment or interest only.

The rates are pretty competitive. For instance you can get a 2 year fixed rate offset remortgage with Scottish Widows at 1.34% at 60% LTV and also 1.79% at 85% LTV. Scottish Widows Bank are also part of the Lloyds Banking Group so they also use the same contractor friendly lending criteria as Halifax.

[barrydidit]

The ones I've seen tend to just be SVR with the offset element tacked on.

[northernladuk]

has the offset mortgage rate come close to repayment yet?

I had one that was 4% with RBS when the normal rates were about 2.5% so wasnt bad but they didn't alter it when the rates got chopped so got out. I'd be interested to see what the situation is as well.

[vetran]

On a serious note have you considered an Offset Mortgage. It sounds like the right mortgage product for what you want to do. By taking out an offset mortgage, you can make your savings work for you. That’s because cash in savings or current accounts is offset against any mortgage balance. This can reduce your mortgage term and also gives you the flexibility to withdraw at anytime.

has the offset mortgage rate come close to repayment yet?

[Freelancer Financials]

Hi all

I only recently bought my first property. My mortgage monthly repayment is fairly manageable and I am in a position where I can set aside a reasonable amount.

I could overpay my mortgage and pay off my mortgage early or I could save for a deposit on a second house, which I would buy to let.

Based on your experiences, what would be the wiser choice? Have you done anything similar in the past? Is it wise to have not 1 but 2 mortgages? I'm pretty young and newbie in these sort of things so every suggestion is very much appreciated.

Thanks

On a serious note have you considered an Offset Mortgage. It sounds like the right mortgage product for what you want to do. By taking out an offset mortgage, you can make your savings work for you. That’s because cash in savings or current accounts is offset against any mortgage balance. This can reduce your mortgage term and also gives you the flexibility to withdraw at anytime.

[DieScum]

I overpay the mortgage by a big chunk every month. Still got another six years or so before it's cleared. It's a safe, unexciting investment that pays more than any similarly safe harbour.

If you can weather storms it's not a bad idea to take on more debt over assets you'll think will grow. Just not as safe.

It's boring though!

I've got a share portfolio which provides a bit of excitement but I don't add to it at the moment.

Your main choice is between safety and a bit more risk (ignoring the divorce angle).

[filthy1980]

numbers in the last few posts have made me feel slightly better about my own outgoings, although I'm not a £600 p/d contractor yet so it's probably all relative

on the debt vs savings question, I've always hated debt and attempted to pay down first mortgage as quickly as possible, but after 3 years of overpayments and rates continually falling, I stopped and bought a BTL

recently taken on a 2nd much larger mortgage for a new residential home and inclination is to pay this down as quickly as possible but understand that whilst rates are still low this may not be the most prudent use of funds

[ChimpMaster]

Yeah, does that seem high? To put it in perspective I'm down £2180 p/m on mortgage payments alone. Bills will easily take that to £2680 before I even buy dinner and a nice dinner will easily cost £40-£80.

Living down south isn't cheap. Not worth doing unless your rates are high.

£2180 mortgage payment - assuming this is your residential mortgage - would equate to a loan of around £500k, which is not far off the amount I was talking about above too.

I'm also in the South East and agree that things are very expensive, mostly housing. Trying to upgrade my home is going to be a real challenge.

[The_Equalizer]

Yeah, does that seem high? To put it in perspective I'm down £2180 p/m on mortgage payments alone. Bills will easily take that to £2680 before I even buy dinner and a nice dinner will easily cost £40-£80.

Living down south isn't cheap. Not worth doing unless your rates are high.

It's not cheap in the outer reaches of the UK either. £2700 out the door at the beginning of the month. That said, the pesky kids make up for a good chunk of that.

[northernladyuk]

Agreed, your advice hasn't been helping and that premium number is costing me a fortune

But it keeps the old man in baccy.

[vetran]

Purely from a math point of view - if the interest on your savings (after fees & tax) is higher than the interest of your debt, then you should save as opposed to overpaying. However, mortgages are a bit different than your typical debt in that you only have your rate for a certain period of time and thus need to consider the risk of a rate rise in the future.

Personally I'm doing this:
---
Take 43k out of company, eat the 2k tax. (Same for the other half)
Eat 3-4k per month "living" expenses.
Overpay the mortgage 10%
Vanguard lifestyle ISA


Business
---
Savings account for the tax / warchest
Extra to Vanguard lifestyle (math wise this should be a wrapped in a SIPP, but I don't do that)
Once I have 100k in the vanguard looking at getting a SPV for a company BTL
Maybe Peer2Peer lending.

Diversify for average returns over the long term. Near term doesn't matter that much since I won't be taking the money out because I don't want to pay the tax. Don't bet on individual stocks, don't try to get rich quick.


Just my opinion; YMMV.

There us some benefit to clearing debt, if you need to borrow then you have slack. Also if you do fall on hard times you have less to service. Unless your debt is fixed rate for the term it makes sense to clear it while its cheap.

Though I suspect a lot of debt is going to be inflated away again shortly.

[ChimpMaster]

£4k including your mortgage isnt high (IMHO).

Depends how much your mortgage payments are and how big your family is I guess.

I reckon my expenditure is ~£2,000 / month excluding mortgage.

[WTFH]

£4k including your mortgage isnt high (IMHO).