Overpayment Calculation Help

mleonard79

Hi Everyone,

I'm trying to work out how much paying an £8,000 lump sum into my mum's mortgage will save her on a yearly basis as well as over the full term remaining but can't find a mortgage calculator that covers everything I need. Her mortgage is part repayment and part interest only and has 3 years and 7 months to run at a fixed rate of 5.29%.

If anyone can direct me to a calculator that could do this for me or could help me work it out I'd be grateful. Thanks.

Regards

Michelle

Joe_Bloggs

MSE Martin has an article that goes through the pros and cons of a mortgage overpayment versus alternative savings strategy. In this article you could match a mortgage overpayment route by finding a net interest rate for savings equal to the mortgage rate.

Turning things around you can find out what the benefits of overpaying are if you could calculate the gross interest paid on the overpayment in a fictional savings account that had the same rate as the mortgage.

I would say that the benefit in saved interest is 5.29/100 x 8000 = £423 a year.
J_B.

shop-to-drop

Try the egg mortgage calculator should fit the bill.

http://new.egg.com/visitor/0,2388,3_54988--View_1028,00.html

mleonard79

shop-to-drop wrote: »

Try the egg mortgage calculator should fit the bill.

http://new.egg.com/visitor/0,2388,3_54988--View_1028,00.html

Hi Shop-to-drop,

Thanks for the suggestion but I'd already tried the Egg one previously - the minimum term it allows is 5 years and it doesn't give a yearly figure. I've looked at so many different calculators I think perhaps what I'm looking for doesn't exist!

Regards

Michelle

mleonard79

Joe_Bloggs wrote: »

I would say that the benefit in saved interest is 5.29/100 x 8000 = £423 a year.
J_B.

Hi Joe,

Thanks for the link to the article.

I thought it would be more complicated than the straight calculation you did above due to compound interest etc but I guess it's a small enough amount for the extra not to be too significant.

Regards

Michelle

Joe_Bloggs

If the original repayments/payments remain the same then the £423 per year reduction in interest goes towards reducing the capital. Thus the interest charged in the future is less and less.
J_B.

mleonard79

Hi Joe,

Thanks for the help.

Regards

Michelle