New to this - silly question

RoxieW

We're thinking of paying a lump sum off our mortgage (10k) - then making overpayments of around £500 month.

This is because we cant be trusted with money in ISA's (gets spent of fancy holidays etc!!) so would rather that the money was locked away where we cant get at it.

Do all overpayments reduce the actual capital rather then interest? Therefore increasing our equity?
Would it reduce the term or payments? We'd rather reduce the term.
Is there a calculator somewhere that works up how much we'll save/how much r'll be paid off?

If it makes any difference we're looking to move up the ladder within 3/4 years - sooner if we spot a bargain.

Thanks all

evab_2

RoxieW wrote: »

Do all overpayments reduce the actual capital rather then interest? Therefore increasing our equity?
Would it reduce the term or payments? We'd rather reduce the term.
Is there a calculator somewhere that works up how much we'll save/how much r'll be paid off?

It depends on what type of mortgage you have e.g. interest only, repayment etc, you should check with your provider whether they reduce term or payments but term would be better to reduce as this would save interest over the years.

There is a sticky with a calculator at the top of the page.

Also check your provider allows fee free overpayments before you go ahead.

dimbo61

1 contact lender and check if you can overpay your mortgage and any limits ?
2 If you have a mortgage of over £100,000 and have not made any overpayments so far then you could pay the £10k off the mortgage now ( this year ) Thinking 10% limit !
3 set up standing order or direct debit to overpay by £500 a month and ask lender to use overpayments to reduce term and not payments
4 ask for mortgage payment to remain static ( are you on fixed rate deal ? )
5 overpaying now will reduce your mortgage and give you a bigger deposit for next home and also prove you can afford much bigger mortgage
GOOD LUCK

RoxieW

hi - thank you

i've checked with bank and we can overpay a lump sum and then monthly by up to £500 without penalty.

We have a repayment mortgage on a SVR (currently 5.25%).

thanks - looks like i'll be joining in on this board!

evab_2

That's great, good luck with your plans!

RoxieW

I cant believe it!! Just put the figures into an overpayment calculator and with the overpayments I intend to make it says we'll have paid off our mortgage in 6 years instead of 21????????????? Also saving £35K interest??????????
That cant be right, surely? Is that right? I'm in shock! Why havent I been doing this sooner!!

Welshlassie

RoxieW wrote: »

I cant believe it!! Just put the figures into an overpayment calculator and with the overpayments I intend to make it says we'll have paid off our mortgage in 6 years instead of 21????????????? Also saving £35K interest??????????
That cant be right, surely? Is that right? I'm in shock! Why havent I been doing this sooner!!

Its amazing isn't it! :rotfl:

We were as equally amazed when we realised what we could save.

RoxieW

truly amazing!

dimbo61

Did this 3 years ago and reduced my term from 22 to 10 years and saved £50,000 in interest.
So get overpaying and GOOD LUCK