Strategy Setting-Up Mortgage Overpayment Goal?

I've been thinking for awhile on how this would be best to set-up and figured I'd run it by all you wonderful budgeters!


Ultimately, I'm looking for the best way of setting a goal towards mortgage overpayments on a yearly basis. Something like - Apply $XX,XXX additional towards mortgage by EOY. With my budget, it's highly variable due to bonuses, stocks vesting, etc... so it's not as easy as making it a recurring monthly cost. The other variable that I can't think around is that I don't want to wait until the EOY to then apply the amount towards the overpayment, I'd like to do this through the year to help continue to lower long term interests. 


How would you set something up for this?

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  • Would a separate category with a Needed for spending by date with date set to the end of the year work? With that you could set a goal for what you would like to gather for the overpayments during the whole year but you can also do payments from that category during the year.

    • Rakuna Hmmn, I didn't think of that as an option. I'll play around with it to see if it works. 

      • MXMOM
      • MXMOM
      • 3 wk ago
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      Sea Green Wizard that’s what I do. We can make one extra payment up to 20% of our mortgage per year. I build it up in the separate category and then when it’s time to make the extra payment I move the balance available to the mortgage category and then make the extra payment using the mortgage category. 

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  • I would solve your bigger issue first -- the variable income. Target your budget at the average level of income. When you make more, stash the extra in a Deferred Income category. When you make less, pull from the DI category to make up the shortage from the average. Normalizing income allows for a more consistent budgeting process with only a single set of priorities. (This is simply the income equivalent to the True Expense concept that you've no doubt seen work well.)

    As for the overpayment, just increase what you budget to the mortgage category and make the larger payments as you go. Obviously, reduce something else so the total budgeted (ignoring the DI budget entry) is at the average level.

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    • dakinemaui That's an interesting way of approaching that I like and may end up using. The tricky part is even trying to average out income level because a big part is stock vesting and selling which tends to fluctuate a lot. Thanks for sharing this approach!

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      • Ceeses
      • Ceeses
      • 4 wk ago
      • Reported - view

      Sea Green Wizard Make a guess. I would assume you have a vague idea of about how much you make each year. Look at previous tax returns? Or look at what you'd like your normalised monthly budget to be and see if it converts to a credible yearly income. You can adapt your initial guess to reality as you get more data in. If you start the process in a lean year, it's harder to put in place than if you are in a fat year.

      If you think the DI category is getting too full, you can always take some more money out of there and budget it to other categories. Or if you think you had a very good year and are worried a lean year is on its way, leave the money in the DI category and use it to keep a "normal" monthly budget during the next lean year.

  • I have an Extra Mortgage category under my Savings Goals, whereas the regular mortgage payment is under Necessary Expenses. The idea being that I have to pay the regular part no matter what but the rest is a type of "savings".  I have regular income and am a month ahead so I have a monthly goal in the Extra Mortgage category.

    When I get extra money (3 paycheck months, my sporadic salary- husband's covers the monthly budget, etc) I typically put a third in there, a third in Income Replacement and a third in an Emergency Fund. Since my Available balance therefore is larger than the budgeted amount I can increase my payment without it increasing my budget.

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