Overpayment calculator - here

Welshlassie

ajmoney wrote: »

Unfortunately I am not in a position to overpay to the extent that it makes much of a difference (according to the overpayment calculators), is there a rough percentage of your mortgage that is good to overpay by anyway?

Every little helps!
As a rough example over a 25 year mortgage for every £1 extra you pay off it will save you around £3 in interest over the course of the mortgage.

ajmoney

Do the interest rates make a difference when you overpay with regard to the interest rates?

Lister_2

ajmoney wrote: »

Do the interest rates make a difference when you overpay with regard to the interest rates?

Not sure exactly what you mean, soz.

The interest rates make a difference in:

A) How much money you will save by overpaying. Higher interest means more money that you would have payed in interest had you not overpayed.

How quickly you can reduce the amount you owe. Higher interest means more of your payment each month goes toward interest, rather than reducing the capital (what you actually owe). Any overpayments you make reduce the capital however, since you have already payed the interest that month in your standard payment. However they also have a knock on effect in that because you now owe a bit less capital, there is less interest to pay per month, and so next month more of your standard payment will go toward paying off the capital.

Sorry, you're probably more confused now. :o

ajmoney

Lister,

Sorry for not being clearer, option B was more or less what I meant. If I make overpayments while the interest is low then it would pay off more capital than when they are higher? I may going round in circles in my head, sorry.

Lister_2

ajmoney wrote: »

Lister,

Sorry for not being clearer, option B was more or less what I meant. If I make overpayments while the interest is low then it would pay off more capital than when they are higher? I may going round in circles in my head, sorry.

No probs. It takes a while to get your head around it.

When you overpay, you overpay capital. Thus interest rates are irrelevent to how much you reduce the amount oweing via overpayment.

However, high interest rates mean that every overpayment you make saves you more money in interest ( A) above). This does not mean that high interest rates are good!

Now, depending on your mortgage type, low interest rates may mean that you have more money spare with which to overpay, because your standard payment has been reduced. For instance, if you are lucky enough to have a tracker that tracks the base rate, then your mortgage payments should be a lot lower now than they were say a year ago. This means you have more spare money available with which to overpay, which is great because when you overpay, you're paying capital, instead of a year ago when you were paying interest.

coastertoaster

Our mortgage is currently £63000, our 5 year fixed rate finishes in August. We pay £450 a month at a rate of 5.49%. In Sept 2010 my hubbie will retire from the army and we will have around £55,000 golden handshake. What do we need to do to get to this figure outstanding in our mortgage as we would love to be debt free when he retires. Th elender has advised us to just change to their normal rate when the fixed expires in August. Can anyone tell me how much a month we will have to pay over teh next 12 months to make the balance left as close to £55,000 as possible?

_dave__4

coastertoaster wrote: »

Our mortgage is currently £63000, ... at a rate of 5.49%. In Sept 2010 my hubbie will retire from the army and we will have around £55,000 golden handshake... Can anyone tell me how much a month we will have to pay over teh next 12 months to make the balance left as close to £55,000 as possible?

Looks like around £940 per month to reduce it to £55,000 after 12 months, at 5.49% throughout:
http://calc-calc-calc.net/get/calc/Mortgage-Remaining/v1/?a=63000&p=940&i=5.49&d=12&d_U=mth

... or around £805 per month to do it in 15 months (upto Sept 2010):
http://calc-calc-calc.net/get/calc/Mortgage-Remaining/v1/?a=63000&p=805&i=5.49&d=15&d_U=mth

Does that help?

coastertoaster

Sorry the 5.49% rate finishes in August and the bank have said to just stay on their standard which they say is 1.5% so currently 5.49 got June, july and August at that rate and pay £450 a month. then from Septemebr the rate will be 1.5% so how much a month to get to £55,000?

_dave__4

coastertoaster wrote: »

Sorry the 5.49% rate finishes in August and the bank have said to just stay on their standard which they say is 1.5% so currently 5.49 got June, july and August at that rate and pay £450 a month. then from Septemebr the rate will be 1.5% so how much a month to get to £55,000?

OK ... the following link seems to suggest that £741 for three months then £627 for another 12 months would do it:
http://calc-calc-calc.net/get/calc/Mortgage-Comparison/v1/?L=63000&I1=5.49&Yrs1=0.25&SVR1=1.5&Term1=9&I2=5.49&Yrs2=1.25

... so maybe around £650 per month (level) for 15 months?
[(3 x 741) + (12 x 627) = 9747, (15 x 650) = 9750.]

_dave__4

_dave_ wrote: »

... so maybe around £650 per month (level) for 15 months?
[(3 x 741) + (12 x 627) = 9747, (15 x 650) = 9750.]

... or £450 for three months then £700 for 12 months?