Make overpayment with penalty, or wait until deal ends and whack it of then?

MadAboutMoney

Hi,

I'm after some help working out the best way to use some money we've now got.

We intend to use it to reduce our outgoings by paying it off the mortgage.

As we see it we can either pay it off the mortgage now (with penalty) or put it in a savings account, use it to pay the mortgage payments each month and then, when our current deal ends, re-mortgage onto another deal paying using the lump sum then to reduce the outstanding amount to remortgage.

I am more than happy to provide loads of details but until I know if anyone is willing to help I'll just summarise in this post. PLEASE feel free to ask ANY questions at all.


Current deal: 2 year tracker with nationwide, approx. half way through.
Penalty for overpayment: 1.5% of overpayment.
(I am aware that I can pay £500 each month penalty free)

As I see it, if make an overpayment of, let's say £50,000 I will pay a penalty of £750 and reduce my monthly mortgage payment by approx. £350

But would I be better banking the £50k, using it to make the mortgage payment each month and then at the end of the deal use the balance of the £50k to reduce the amount to borrow on a new mortgage deal?

I understand that there is probably not enought details there to offer detailed advice but if anyone id happy to help me understand and crunch some numbers - PLEASE ASK for them :T


Or is one of the ways obviously better? Or is there another idea that I have not considered?

Thanks in advance for any help at all



.

MadAboutMoney

Nobody?

Am I going to have to crunch and fudge some numbers all by myself then? :eek:

MadAboutMoney

Well I ended up crunching the numbers myself and went with paying it off now.

Couple more payment and we'll be mortgage free :beer:

We're not paying the mortgage(s) of though, we'll leave £100 owing on them and convert to interest only. That way, the BS look after the deeds and as the overpayments are always available for draw down, we can have very low interest loans when we need them :T