Overpayment calculator - here

messydesk73

Sorry to jump in, but if you make an overpayment on your repayment mortgage is it better to reduce your monthly payments or the term? We owe £56.5K and have just under 14 years left, on Nationwide's BMR at 2.5%. We've got a lump sum (the money we've 'saved' since dropping onto the lower interest rate when our fixed deal ended) and also want to overpay an extra £100-200 per month. Any advice gratefully received

blueberrypie

messydesk73 wrote: »

Sorry to jump in, but if you make an overpayment on your repayment mortgage is it better to reduce your monthly payments or the term? We owe £56.5K and have just under 14 years left, on Nationwide's BMR at 2.5%. We've got a lump sum (the money we've 'saved' since dropping onto the lower interest rate when our fixed deal ended) and also want to overpay an extra £100-200 per month. Any advice gratefully received

See my reply in post 311 of this thread - http://forums.moneysavingexpert.com/showpost.php?p=41222820&postcount=311

ExperiMentor

halloweenqueen wrote: »

I just wanted to ask a question, when my interest rate came down to 5.35o % from 5.600 I was sent a letter telling me the monthly payment required to repay my mortgage over the original term is £725.75, why do all the mortgage calculators tell me the payment is £719.34? I kept the payments at their original DD to help overpay it, but just curious why my bank makes it £6 more a month?
Thanks!

A difference of £6 per month could be explained by any one or more of the following:
* Rounding to whole years rather than exact months [as mentioned by others] (actually exact days would be best)
* Annually rather than daily-calculated interest
* Changed payment starting "next month" rather than "this month"
* Is your lender including a Buildings Insurance premium?

And probably others ...

Overall message: the Calculators are bery useful as a guide but cannot be relied upon to be absolutely prcise

ExperiMentor

messydesk73 wrote: »

Sorry to jump in, but if you make an overpayment on your repayment mortgage is it better to reduce your monthly payments or the term? We owe £56.5K and have just under 14 years left, on Nationwide's BMR at 2.5%. We've got a lump sum (the money we've 'saved' since dropping onto the lower interest rate when our fixed deal ended) and also want to overpay an extra £100-200 per month. Any advice gratefully received

The wording used on Nationwide's website (from memory, it is the same as you use here) is delightfully unclear.

The answer thoigh: the faster you pay it off, the more you will save and the shorter the term will be. Why on earth would someone particularly want to make an overpayment then reduce their monthly payment? Almost everyone will want to maintain monthly payments, ie 'reduce the term'.

Other things to look out for include: Does your lender allow you to 'borrow back' any overpayment after it has been made?

Once a mortgage is set up and you have established a track record, lenders are often ver flexible eg will allow you to overpay, extend or reduce the term, change between 'Interest Only' and 'Repayment'. Changes within a fixed rate period seems to be the only thing they are strict about

eg 1. I was on Nationwide's BMR at 2.5%, a rate so good that they do not use it any more (people coming off fixed rates now roll onto SMR at ~4%). Part of the loan was 'Interest Only' so to avoid losing the excellent rate I switched it to 'Repayment', allowing me to borrow a smaller amount (higher rate) for a 2nd property.

eg 2. Mother's mortgage with HBOS had only 3 months to run, and she needed new windows. A bank loan would have been 9% or more and taken many years to pay off, and the mortgage small print said 'further advances not allowed in the last 6 months'. We asked nicely and HBOS did all the calculations to maker a further advance and simply extended her mortgage by 2.5 years at the same monthly payment. Much cheaper for us and the bank kept the business.

If you don't ask, you won't get!

psychrai

hi, i am new to this and hope i dont sound daft. is it better of to pay a lump sum to reduce a mortgage or reduce the term of the mortgage? i have 107000 outstanding, if i do overpay around 7000 , does my mortgage reduce to 100000 or is interest also taken into consideration? thanks

blueberrypie

psychrai wrote: »

hi, i am new to this and hope i dont sound daft. is it better of to pay a lump sum to reduce a mortgage or reduce the term of the mortgage?

They're both the same thing. If you pay a chunk off your mortgage, then continue to pay as before, your mortgage will be paid off sooner. The other option is to have the lender recalculate your monthly mortgage payments based on your newly-reduced balance - they'll work out how much you need to pay each month until the date your mortgage was originally intended to finish, so that it will still finish on that date, but your monthly payments will be less.

i have 107000 outstanding, if i do overpay around 7000 , does my mortgage reduce to 100000 or is interest also taken into consideration? thanks

If your balance today is £107k and you pay off £7k, your balance is then £100k.

How much interest you pay is determined by your interest rate (which won't change due to your extra payment) and how much your mortgage balance is (which will change). So from the time you make that overpayment, you will pay less in interest.

Cheech_Chong

Hi there,been lurking for a while now,about time I said something.
I have a mortgage of 24K at a variable rate(4.24) over 10yrs 3months,checking the overpayment calculator If I overpay by £750 I can reduce the term to 2yrs 3months,they also do an offset mortgage which I'm able to put 16K in,question is can I overpay that much plus have that much in an offset mortgage?

Thanks for any advice.

lindseywatson

Thanks for posting the calculator at the start of this thread. My husband and I were thinking about making over payments but never got round to it. However, when I used the calculator and saw we could pay off the mortgage 7 years early I was so shocked and it was the kick up the behind we needed! Still a long way to go at 18 years instead of 25, but rather in our pocket and all that!

Mirandolina

Hi,
Wonder if you can help or direct me to a calculator that can please.
Just followed the first rules of overpaying and spoke to the bank who have advised we can only overpay by 5% this year. Our term is up next March, so it changes then. Gutted as I'd worked out we could reduce our mortgage from 20 years to 2 years 11 months.

Our current mortgage is £120k at 5% with 20 years left. We can save £3200 a month however this year we are only allowed to overpay by £6000. Then after March 2012, we can overpay as much as we like. Can anyone give me an idea of when it would be paid off? We'd still save the extra money in an account and put it in as a lump sum next April.

Sorry - hope that makes sense - sounds to me like a maths exam question!

Thanks for any help.

blueberrypie

Mirandolina wrote: »

Hi,
Wonder if you can help or direct me to a calculator that can please.

Have a look at Locoblade's mortgage spreadsheet, which you can find here - https://forums.moneysavingexpert.com/discussion/1157173