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  • FIRST POST
    • bagpussuk
    • By bagpussuk 22nd Nov 17, 6:57 AM
    • 5Posts
    • 0Thanks
    bagpussuk
    Anyone great with a calculator for an early repayment of mortgage? :)
    • #1
    • 22nd Nov 17, 6:57 AM
    Anyone great with a calculator for an early repayment of mortgage? :) 22nd Nov 17 at 6:57 AM
    Hello,

    I am getting a lump sum (though losing job) and would like to pay my mortgage off. Lump sum + some savings = about the same amount left on my mortgage with a little lift over to help me until I get another job.

    I will owe around £63k on my mortgage. I have early reception fee of 2% till April 2018 and 1% till April 2019.

    My plan was to overpay the max (10%/£6.3k) in December and then again in January for max (about £5.6k). My mortgage year is Jan-Dec.

    My mortgage is £395 a month fixed till April 2019 @ 1.74%.

    Paying the 2% early redemption is a no no, I get that, but will paying the 1% early redemption fee from next April be better for me than paying another year @ 1.74%.

    The savings options are around 1.3% for a instant access or 1.95% for a 1 year tie in.

    I'd rather pay off mortgage and have that feeling of 'no mortgage' if possible but only if its the best thing to do financially.

    Thanks in advance
    Last edited by bagpussuk; 22-11-2017 at 7:37 AM.
Page 1
    • ACG
    • By ACG 22nd Nov 17, 9:30 AM
    • 15,906 Posts
    • 8,149 Thanks
    ACG
    • #2
    • 22nd Nov 17, 9:30 AM
    • #2
    • 22nd Nov 17, 9:30 AM
    In very simple terms...
    Financially if you keep it, it will cost you 1.74%.
    If you pay it off, it will cost you 1%.
    If you put it in savings, it will cost you 1.74% minus 1.3%.

    So on the face of it, paying off what you can penalty free and putting the rest in savings seems the way forward. But I completely understand your point about being Mortgage free and so you have to weigh up whether what it will "cost" you to do that is worth it.

    I dont have the time to do the sums now, but on £57k (£63k minus your 10%(?) overpayment facility, I doubt the difference will be a lot on those sorts of rates.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • getmore4less
    • By getmore4less 22nd Nov 17, 9:59 AM
    • 30,821 Posts
    • 18,429 Thanks
    getmore4less
    • #3
    • 22nd Nov 17, 9:59 AM
    • #3
    • 22nd Nov 17, 9:59 AM
    summary
    Hello,

    I will owe around £63k on my mortgage.
    I have early reception fee of
    2% till April 2018 and
    1% till April 2019.

    My plan was to overpay
    the max (10%/£6.3k) in December
    then again in January for max (about £5.6k).

    My mortgage year is Jan-Dec.

    My mortgage is £395 a month fixed till April 2019 @ 1.74%.

    Paying the 2% early redemption is a no no, I get that, but will paying the 1% early redemption fee from next April be better for me than paying another year @ 1.74%.

    The savings options are around 1.3% for a instant access or 1.95% for a 1 year tie in.

    I'd rather pay off mortgage and have that feeling of 'no mortgage' if possible but only if its the best thing to do financially.

    Thanks in advance
    Originally posted by bagpussuk
    the key there is the 1.95% is more than the mortgage os if no tax on the savings you have your answer foir a year, rates are creeping up so there is a chance you may be better of just saving.

    Reality is the numbers are not that big when you look at the details.


    between now Dec 17 and April 19 inclusive is 17 months
    if you were interest only that's £1523 interest the max you could ever save paying now.

    But you are repayment so that goes lower by April 19 you are in this position

    £63,000 @ 1.74% paying £395pm £57,777.63, interest £1493


    if we work with Dec payment and 10%(£6,300) overpayment on £63000
    Jan you will owe £56,396.
    Will they adjust the payment at this point?
    lets go with yes as that is worst case(15years left close enough) new payment £356pm
    now we have Jan payment and another 10%(£5,640)
    Feb you owe £50,482
    recalc payment again on 15years still close enough £319pm

    now down to 15 months to go to April 19

    £50,482 @ 1.74% £319pm £46,757 interest £1,060

    With a 2% ERC not worth it so pay till April(2 payments) and 1%
    £50,482 @ 1.74% £319pm £49,744.
    12months to go
    £49,744 @ 1.74% £319pm £46,758 interest £842

    or pay the erc £468.

    Saving £374.
    (that's before you account for the potential interest on the money which at 1.3 will be more than the saving)

    I would keep the money in a savings account if I can get a better return.

    Thing is you won't get cheap borrowing like this anywhere else and having the funds available just in case for close to zero cost is worth it unless you are the sort that might just spend it.
    Last edited by getmore4less; 22-11-2017 at 10:01 AM.
    • jkl123
    • By jkl123 25th Nov 17, 9:32 PM
    • 36 Posts
    • 32 Thanks
    jkl123
    • #4
    • 25th Nov 17, 9:32 PM
    • #4
    • 25th Nov 17, 9:32 PM
    if you go on the mortgage calculators, there is one that calculates how much your overpayments will save you in interest etc. and theres another one that shows you if overpaying or saving is better for you (shows the saving rate you would need to make it better to save then overpay)
    • robatwork
    • By robatwork 26th Nov 17, 10:27 AM
    • 4,009 Posts
    • 4,353 Thanks
    robatwork
    • #5
    • 26th Nov 17, 10:27 AM
    • #5
    • 26th Nov 17, 10:27 AM

    Thing is you won't get cheap borrowing like this anywhere else and having the funds available just in case for close to zero cost is worth it unless you are the sort that might just spend it.
    Originally posted by getmore4less
    Some more great info from this forum's resident number cruncher.....but this comment is crucial.

    If you pay off your mortgage you'll feel great but have zero savings. If you want to buy something major (car, cruise, child's house deposit) in effect if you keep your mortgage you can buy it from savings at a very low 1.74% which is far lower than you could borrow at.
    • CheBee
    • By CheBee 26th Nov 17, 11:15 AM
    • 30 Posts
    • 44 Thanks
    CheBee
    • #6
    • 26th Nov 17, 11:15 AM
    • #6
    • 26th Nov 17, 11:15 AM
    https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

    Will this help?
    Single, FTB, 2017. Property viewed 30th Sep. Offer accepted 2nd Oct. Mortgage application 6th Oct. Mortgage accepted 23rd Oct // The 'Save £12k in 2017'... Goal reached, 15% deposit saved over 5 years
    • dimbo61
    • By dimbo61 27th Nov 17, 8:24 AM
    • 9,591 Posts
    • 5,184 Thanks
    dimbo61
    • #7
    • 27th Nov 17, 8:24 AM
    • #7
    • 27th Nov 17, 8:24 AM
    I hate paying one penny more in interest than I need too.
    So for me I would pay off the 10% now and another 10% in Jan 2018.
    I would take out a current account with Nationwide £2,500 and have 2 regular savers to also earn 5% for 12 months.
    Put any other savings in saving accounts paying more than your mortgage rate and see where you are in April 2019
    • bagpussuk
    • By bagpussuk 7th Dec 17, 10:39 AM
    • 5 Posts
    • 0 Thanks
    bagpussuk
    • #8
    • 7th Dec 17, 10:39 AM
    • #8
    • 7th Dec 17, 10:39 AM
    Great detail getmoreforless

    Based on what you say, am I right in thinking then that there would be no point in overpaying the 2 lots of 10% and to put them into savings?
    • getmore4less
    • By getmore4less 7th Dec 17, 10:50 AM
    • 30,821 Posts
    • 18,429 Thanks
    getmore4less
    • #9
    • 7th Dec 17, 10:50 AM
    • #9
    • 7th Dec 17, 10:50 AM
    Needs checking but I think you can get more interest than you are paying even if you have to lock the savings.
    That's before any ERC come into play.

    if rates go up your borrowings are fixed and savings may creep up if you have not fixed it all.

    the actual differences are not big by April 2019 but having the cash sitting there has value.
    • dimbo61
    • By dimbo61 7th Dec 17, 4:43 PM
    • 9,591 Posts
    • 5,184 Thanks
    dimbo61
    " (though losing job) "
    Please bear this in mind.
    You may well need savings to live on ( Hopefully you will get another job quickly) However if you have used some of your money to pay down some of your debt ( mortgage ) say 10% now and 10% after Xmas your mortgage payment will be smaller
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