How to calculate the benefit of making overpayments on a mortgage - Help Please!

samphe

I'm looking to remortgage £116k. I was initially interested in the 5year fixed rate of 4.95% that i've seen. Repayments would be £928 per month.

I have read on this forum about the co-op doing a tracker capped at 5.99%. Currently 2.99%.

Initially the repayments would be £809.15. If it went to the capped max rate the repayments would be £994.65.

Obviously i have the age old debate of what is the best to do, but i was also interested to know how to calculate the effect on our mortgage if we overpaid repayments in line with the fixed rate repayments while the rate was low. For example while the rate is still 2.99%, overpaying by say £100 each month. (i think this is allowed). I've heard that if you overpay it will make a big difference to your mortgage. But how do i work out how much ???

Thanks for your help.

jemw

there are lots and lots of OP calcs out there, but the one i find easiest to both use and understand is here: http://www.shiredirect.com/mortgages/mortgage-calculator/additional-mortgage-payments-calculator.php

if you do decide to choose the tracker and overpay, make sure you know what the overpayment limits are. we have a 10yr fixed with co-op (found them fab, btw) and can only overpay 5% per year, whereas lots of other ppl on this site with a co-op mortgage can overpay by 10% per year

hope that helps?

RufusA

samphe wrote: »

I've heard that if you overpay it will make a big difference to your mortgage. But how do i work out how much ???
Thanks for your help.

This is often said, but IMHO for overpayments alone the difference isn't as stark as it would appear particularly during periods of low interest rates as you don't get the huge compounding affect.

The best way to see would be to use a spreadsheet - there's one someone on the forum created you can use as a basis, and just modify it to take account of overpayments.

For simple total term figures, look at:

http://whatmortgage.co.uk/calculators/fleximortgage.html

The key thing is to look at the total paid, rather than the better looking mortgage term.

However a low interest rate being overpaid vs a higher interest rate can make a more significant difference to the total sum paid. As more of the money you pay each money repays the loan rather than servicing the interest.

But you'd need a spreadsheet to see totals over say a five year period with changing interest rates.

HTH - Rufus.