How to calculate effectiveness of over paying my mortgage !

Danjames90

Hi

I know it is a good idea to over pay your mortgage but is there a way to calculate the effectiveness, without a degree in maths.

I know there are factors to consider such as intrest rates changes etc but there must be a rough way, can anyone help.

Thanks.

Dan

JF77

Try this...

http://www.themoneypages.com/calculators/fleximortgage.html

Danjames90

great help thank you J

CocoLoco_3

May I just hijack this thread please?

I have half of my mortgage as repayment and half as interest only. Both are fixed rates ( same rate and fixed rate expires at the same time ), and I'm allowed to repay up to 10% each year ( some hope! )

If I were to overpay my mortgage, would I be better off paying this money into my repayment mortgage or into the interest-only mortgage? ( my theory was, i could work out how much is actually being repaid on the repayment mortgage each month, and match that amount, to get the effect of paying as if all was repayment mortgage, not split )

Does that make sense?

rover25

I have just put in 165,000 over 33 yrs at 5%. That equals £851.61 per month which seems about right.
If I put in £1000 to over pay per month and keep everything else the same, it seems to reduce the term to just over 9 years! Could this be right?
new repayment £1851.61 is saving of £130,570 with new term of 9.3 yrs saving 23.7 yrs!
Am I reading this all wrong :rolleyes:

CLAPTON

if both have the same interest rate and there are no charges and all other things being equal then it will make no financial difference which you overpay on.

rover25

If it takes just over 9 yrs to clear 165,000 at an extra 1000 per month, would I be right in thinking 4.5 yrs at 1000 extra per month would bring it down to about £83,000?

Reds-on-Sea

CocoLoco wrote: »

May I just hijack this thread please?

I have half of my mortgage as repayment and half as interest only. Both are fixed rates ( same rate and fixed rate expires at the same time ), and I'm allowed to repay up to 10% each year ( some hope! )

If I were to overpay my mortgage, would I be better off paying this money into my repayment mortgage or into the interest-only mortgage? ( my theory was, i could work out how much is actually being repaid on the repayment mortgage each month, and match that amount, to get the effect of paying as if all was repayment mortgage, not split )

Does that make sense?

Hello, yes it makes sense.

It depends on whether it's like 2 separate mortgages or whether the total amount is split 50/50 over the life of your fixed rates.

e.g. First scenario:
£100k mortgage, repayment mortgage on £50k of this:
- pretty straightforward, repayments stay the same each month, but as you're repaying a bit of your capital each month, the amount you're paying interest on gradually gets less and less, therefore your £50k of debt will reduce exponentially.
£100k mortgage, interest only mortgage on £50k of this:
- repayments also stay the same (though will be less than the repayment part of your mortgage) you never pay back any capital, so you'll always be paying interest on £50k, even on the last month of your mortgage when you will still be left with £50k of debt.

In this instance, it will be more beneficial to you to overpay on your interest only mortgage as it will result in your having less actual debt (to pay interest on)


Second scenario:
£100k mortgage, entire debt split 50/50
I think in this case what you end up doing is like a "half" repayment mortgage, you pay interest on the whole amount you borrow, but you're only paying back for half of it so the capital will drop half as quickly.
example when your debt drops to £80k, your repayment mortgage counts for £40k, and your interest only counts for £40k

In this instance it doesn't make any difference what "mortgage" you over pay into.

I don't really know how split mortgages work, but I imagine it must be one of the above examples. Go to your mortgage provider and ask them Either way, yes, if you were to overpay to the amount of the repayment mortgage, you would essentially have a normal repayment mortgage for the entire amount.

Reds-on-Sea

rover25 wrote: »

If it takes just over 9 yrs to clear 165,000 at an extra 1000 per month, would I be right in thinking 4.5 yrs at 1000 extra per month would bring it down to about £83,000?

it depends what kind of mortgage you've got. Repayment isn't a straight line graph, you won't have paid off half your mortgage, half way through it as the payment/interest ratio gradually changes throughout the life of your mortgage. You'll have paid off less than half, half way through, but the second half will decrease much, much quicker.

lol - *confused!*

rover25

Its a repayment mortgage Should have guessed it wouldn't be that simple. Anyone have idea how much would be owed on 165000 mortgage if pay off 1000 per month extra on top on owed eg £850 per month for 3 yrs taking an average of 5% interest rate

2nd question is is the 9.3 yrs right that that site worked out for me?
Thanks

Reds-on-Sea

Yes, the 9.3 years is correct if you overpay £1000 a month.

I can't work out exactly how much you'll still owe, I don't know enough about calculating rates & overpayments, good luck though, if you find some kinda calculator, post it here, I'd love to see it!