Can someone do me a quick mortgage calculation?

puddy

If I have a mortgage of 66k, currently on a 10 year fixed rate of 4.98, with 8 years of the fixed to run, with the total life of the mortgage left of 13 years (or 14?), how much interest would I save if I paid off 16k of the mortgage now, leaving a mortgage of 50k?
My current payments are 557 a month, I pay 560 to round it up

Apparently when I port the mortgage in a couple of weeks, I can pay off 25% of it without incurring the hefty ERC that you would normaally pay. Wondering whether to do it, or have the money in the bank, earning huge interest rates, (haha), other than that, i think I can only over pay 5% per year without a charge

poppysarah

The farmer would dig the hole in 2 days.

Sorry haven't got a clue about the maths BUT it's like one of those horrid problems they give you at school.

As for paying off a chunk - if you have cash lay around getting a miserable rate of interest then perhaps - I'd leave some for emergencies still - but if you have no other plans for it it's probably as good as any.

puddy

Hahahha, thats exactly why I cant even begin to work it out myself, I cant STAND calculations like that!!

Well, if all goes to plan, fingers cross, I should have that much left over and some to also put in an ISA. However, I have NO savings, and no pension provision (Im 37) so I had hoped before all the HPC and interest rate drop that when I sold up and boughtsomething cheaper I would have a little nest egg for my pension. That has now dwindled down from over 80k to about 20k. So Im thinking, Im not going to be able to get much interest from that amount now, should I pay the money into the mortgage if poss and use the money that I now pay on debts (which will be paid off in the sale) to get some savings.

theartfullodger

Someone could work it out,,, but, why not ask the mortgage lender?? They's got the ****ing computers & spreadsheets set up & ready (and "fixed rate of 4.98%" doesn't mean EXACTLY the same for every lender...

(You could of course get more than 4.98% investing money - Government Bonds, Zopa, - yes, there are risks everywhere including property values and the UK £££- and then if a rainy day arrived not have to go scrabbling for a loan in a hurry when you may no longer be such an attractive prospect for the Banks...)


Good luck!

Cheers!

mlz1413

If you pay the lump sum off then your £560pm will then pay down the mortgage much quicker probably within its 8yr term so be careful not to go over your 5% allowance.

If you are paying off your debts first and keeping some aside like £3600 in an ISA then paying off a lump sum seems a good choice, but ensure you keep some aside as only flexible mortgages let you have back any overpayments.

Admittedly interest rates are pants at the mo, but that won't be for life so if you can save some money regularly you can review how and where it is saved as the ecomony alters.

I've just made the decision to pay my savings off my fixed rate mortgage due to the interest rates.

puddy

dodger - I know, I can never get hold of the bloke, he's always taking 'applications', but I think he's working till 8 tonight, so I will keep trying.

I didnt know there were interest rates on savings more than 5%???

theartfullodger

Lodger not dodger ... please, my dodging days are over ;-)

e.g.
http://uk.zopa.com/ZopaWeb/public/lending/lending-at-zopa.html

But, as with other institutions (Icelandic Banks, the bloke down the pub) there are risks (and rewards..)

I'm lending not-a-lot at the moment, and getting between 8.61% and 12.68%.

Since i started 1st Oct 2008 I've had no problems.

Property, stocks&shares and the funds have been a ****ing disaster this last 12 months...

I think you have to spread the risk (I did - some worked, some didn't...)

Ho hum.. At least I've me 'ealth, a lovely wife & 3 fine sons.. That's what really, really matters...

Cheers!

Artful

PS "The Bloke". Do you mean your broker?? If so, he's only in it for the commission.. As the company direct.. (you are, after all, the client, not the thought-by-some-parasitic-broker)

puddy

sorry lodger, i can see you're lodging and not dodging!!!

the 'bloke' meaning the man at the woolwich/barclays (whoever they are nowadays) who is dealing with the application and sale. he's very nice actually.

crikey, just had a look at that zopa,,,,,and you've had no problems? who are the borrowers?

theartfullodger

Yup: "Lodging" with the wife.

We keep our financial affairs separate: She has her own house in her name & lets me stay from time2time...

Zopa borrowers are 27 different individuals borrowing various amounts: I only lend each one £10 and in one case £50. Loans are apparently for various things - loan consolidation, car, home improvements, wedding costs.. We will see (I think you need to be something of a gambler...).

Suspect Zopa will give me a better return than the Barclays shares my dad left me... which had dropped over 80% at one point in the last 12 months... AAAAAAAAAAAAAAARRRRRRRRRRRRRRRRRGGGGGGGGGGGHHHH!!!

Cheers & best wishes

Artful

poppysarah

I looked at zopa - looks like they do more checks than the banks have done in the recent past
Max is 25k in there though without a CCL though.

m_13

jenner wrote: »

If I have a mortgage of 66k, currently on a 10 year fixed rate of 4.98, with 8 years of the fixed to run, with the total life of the mortgage left of 13 years (or 14?), how much interest would I save if I paid off 16k of the mortgage now, leaving a mortgage of 50k?
My current payments are 557 a month, I pay 560 to round it up

Apparently when I port the mortgage in a couple of weeks, I can pay off 25% of it without incurring the hefty ERC that you would normaally pay. Wondering whether to do it, or have the money in the bank, earning huge interest rates, (haha), other than that, i think I can only over pay 5% per year without a charge

Using the Jeacle calculator and based on you starting a new mortgage today for 13 years at a fixed rate of 4.98% for the sum of £66k your monthly payment is £575.55 so I think you must have 13 years and some months left.

Paying off £16k in April 2009 would save you £11,441.93 in interest you would have otherwise paid. If the interest rate at the end of the fixed period is higher than 4.98% the saving will be higher. If the interest rate at the end of the fixed period is lower than 4.98% then the saving will be lower. Your mortgage will end 3 years and 11 months early. However, this is based on you continuing to pay the amount you pay now each month and your lender will reduce this when you owe less.

Is the 5% per annum that you can overpay 5% of the remaining debt or 5% of the original amount borrowed. If it's 5% of the remaining debt and you pay off the £16k you can overpay (all approximate) £2300 in 2009, £1960 in 2010, £1600 in 2011, £1250 in 2012 and £900 in 2013. If you paid all of these approximate amounts in the April of the relevant year then your mortgage would end in August 2016 which is before your fixed rate ends so may not be possible. The total amount of interest saved is £14061.43.

Unless you can get 4.89% anywhere on your money then I'd pay the mortgage off.