the richest man in atherstone

Having settled into our new home and got used to our new mortgage, we've decided to make a concerted effort to overpay our mortgage to reduce the overall amount of interest we pay and reduce the term.

Ideally, we would like to pay it off as soon as possible, but doing this also gives us a bit of a cushion should we fall upon hard times - overpaying now will give us the option to take payment holidays in the future.

We chose a mortgage with ING Direct because it has a decent variable interest rate (5.8% at present) and gives us the flexibility to make overpayments as and when we want. It also has no upfront fees (the valuation fee was returned upon completion) and no leaving fees. The lack of redemption penalties was important for us in case ING Direct suddenly made their Standard Variable Rate uncompetitive once they had their quota of customers like they did with their savings account. It would seem inertia is a good money-maker for banks!

When we moved house a couple of months ago, our mortgage was £64'950. This month we paid off an additional £1000 of the loan with cash left over from the money we put aside for moving expenses - I find it's always best to over-budget.

On top of that, two monthly repayments of just over £400 have reduced the debt to £63'741.

After a little bit of jiggling with our accounts, we have budgeted a further £150 per month of mortgage overpayments for the rest of the year. This should reduce the capital by around a further £1000 by Xmas.

(By the way, I used my MORTGAGE CALCULATOR to help with the calculations. As well as working out your monthly payments and showing a complete amortised schedule, it will also show the effects of making overpayments to your mortgage - and best of all, it's free to use.)

Whilst I was playing with the figures, I got to thinking about how the interest rates on my savings compare with the interest rates on my mortgage. I then realised that unless my savings and investments interest rates can at least equal my mortgage interest rates, the money would be better spent on my mortgage because the interest earned would be less than interest spent. This is something I've never considered before and puts forward a good argument for putting more money into my mortgage.

Well, that's something to think about some more and discuss another day...