Joining the club.

tomstickland

Now that savings rates have dipped so low I've decided that I'm better off overpaying the mortgage. I had a look at my spreadsheet and realised that 50K net debt will be attainable in the next 12 months, so that's my target. I made my first overpayment two weeks ago, putting £1007 into the mortgage. That's knocked £10 off my monthly payments already.
My aim is to overpay the 10% I can for this year as quickly as possible, using a lump of savings to get me going.

TOPAZ_2

Congratulations

Good luck - hope to hear more from you soon - Paying off the mortgage quickly becomes addictive.

I have an Overpayment going through tomorrow and I am feeling really excited

Topaz

tomstickland

If I can get down to £40K then I'll start to regard it as a small mortgage. That motivates me pretty well.

dimbo61

Check how much it would cost to reduce the term ( usually a small charge ) then your payments could remain the same !

tomstickland

That would be good; I don't want to reduce the monthly repayments.

StuartGMC

Tom
Good luck in the plan;hope to hear more detail and maybe a diary to record your progress?

setmefree2

and Good Luck. Looking to forward to hearing about your progress.:D

tomstickland

Halifax will change the term for no cost.They accept 10% overpayment of outstanding amount in a 12 month rolling window. So at any time I look to see what was outstanding 12 months previously, take 10% of that, subtract any overpayments made from then until now and that's how much more I can overpay.

tomstickland

I'm dead excited. I've just done a spreadsheet to see what happens if I reduce the term.

Let's say that I pay £7K off and start the model with 64K owed over 22 years. ish.On the current terms I'd be paying about £460 per month for 22 years, ie: total of £121K.I'd pass the £50K point in 8 years time.

Now, if I reduced the term to 10 years I'd be paying £729 per month, ie: total of 88K. I'd pass £50K in 3 years time.

If I reduced the term to 6 years I'd be paying £1078 per month, ie: total of £78K and I'd pass £50K in 1.5 years time.

The thing is I could afford £1K per month, I'd save about £43K in interest and I'd be down to £30K of debt in 3 years.

setmefree2

LOL - There is a sticky on different Mortgage Calculators on the top of the board. I quite like the Guardian one.

http://money.guardian.co.uk/calculator/form/0,,603156,00.html

I also like the Fool one

http://www.fool.co.uk/mortgages/mortgage-calculator/overpayment-calculator.aspx

As for spreadsheets, there are some spreadsheet nerds on this board...Stuart and FB are the worst

tomstickland

I always make my own spreadsheets so I know exactly what is going on. If anyone is interested, the basic equations I used were:T is total amount borrowedm is monthly paymentn is term of mortgage in monthsr is monthly multiplier (1 + annual % rate/1200)The total amount outstanding is:month 0: Tmonth 1: (T-m)*rmonth 2: ( (T-m)*r - m)*rmonth 3: ( ((T-m)*r-m)*r - m )*rie:month 3: T*r^3 -m*r^3 - m*r^2 - m*rThe monthly terms are a geometric progression and the sum of them can be calculated from well know summatino of a geometric progression formula.So total owed at month i is:T*r^i - m*(r^i-1)/(r-1)This has to reach zero by the end of the mortgage, which occurs at month n.Hence:T*r^n = m (r^n-1)/(r-1)So: m = T * r^n*(r-1)/(r^n-1)This gives the correct answer for my mortgage. I've conveniently ignored the fine detail as to whether anything is paid at the start of the first month, or whether it's payed at the end of the first month. However, the first interest payment is usually calculated separately for a mortgage.The amount outstanding at any moment is:T*r^i - m*(r^i-1)/(r-1)Substituting for m,Outstanding amount at month i = T * ( r^i - r^n/(r^n-1)*(r^i-1) )