Overpayment in realtime vs bulk

tegai1

Hi,
We are about to come off our 2 yr fixed rate of 6.08% with Nationwide and go onto the SVR or as Nationwide call it BMR (base mortgage rate) at 2% above base, so currently I will be paying 2.5%.
Basically Nationwide will be taking £200 less per month from our account. So my question is this: Do I overpay by £200 and therefore continue to pay Nationwide the same as I have been doing over the last 2 years or do I take the £200 and save it?
Could someone tell me how to calculate the difference in overpaying real time vs overpaying in bulk (Overpay £4800 after 2 years)?
I do have money in savings for a rainy day (enough to last 9 months out of work), but I do like the thought of having even more money at my fingertips just in case!
If the money saved by overpaying each month is much greater than my bulk payment option then obviously this is what I’ll do.
Please assume that the £200pm I keep will not gain interest as I’ll be stashing this in Premium Bonds.
Thanks in advance guys.

OzzMosiz_2

You will save more money paying on a monthly basis than on a yearly lump sum basis as the interest will reduce every month.

opinions4u

The Nationwide rate is 2.5%. The PB prize fund is 1.5%.

Assuming an average PB return would be achieved, you would be better off repaying mortgage debt sooner, rather than deferring it.

tegai1

OzzMosiz wrote: »

You will save more money paying on a monthly basis than on a yearly lump sum basis as the interest will reduce every month.

Thanks Ozz,
Can you show me the diff in interest paid over two years between the two options?

Money_Saving_Professional

Try entering your loan details in one of the various offset mortgage calculators available on the net - such as Woolwich or One Account. One of these should do the sums for you!