knocking years off your mortgage

brooke1

Hi,
After speaking to my bank today they have said if I pay £100 extra per month off my 17yr mortgage I will save 3 and a half years. To knock money off I would have to pay more than £500 in at a time which I can't afford.
I do want to move house in the future.
I'm wondering if it sounds worth it?
WHAT DO YOU GUYS THINK?

ViolaLass

It's always worth paying more if you can afford it (and provided you can't get a better interest rate on savings).

abouttimetoo

Welcome to the board Brooke1

What do you mean about 'knocking money off'? If you mean save money on your mortgage then that is exactly what will happen by you paying it off 3.5 years early as you won't have paid the interest for those 3.5 years.

You'll need to give us a bit more info to reply properly e.g. amount of your mortgage, interest being paid etc

Regards

pammyj74

welcome to the MFWs section, What I tend to do is overpay as much as I can afford so if one month you can only OP £30 but the next month you may be able to OP £150. It's totally up to you how much you want to OP.
I have redone my mortgage terms as I know I can afford the extra £100 a month so my mortgage has been reduced to just 12 years now and I can still OP a llittle on top of that as well.

Good luck with it, it is definitely worth OP anything no matter how big or small because you will save the interest over the years and take a few months off the term in the process.

I have literally saved thousands and thousands by OPing and reducing my term by 9 years so far.

Catanddogs

We have saved loads on interest by over paying GOOD LUCK!

tiff

Have you seen the mortgage overpayment calculator on this site? http://www.moneysavingexpert.com/mortgages/mortgage-calculator Go to the middle button "mortgage calc inc overpayments" and then fill in your details. You can then play about with overpayments and see how it affects your mortgage.

Could you put the £100 a month into a savings account and then pay £500 when you have it? (assuming you mean the minimum overpayment you can make is £500 or have I got that wrong?)

pammyj74

I read it that the norm payment plus OP would be over £500 but could be wrong. I have never heard of a minimum OP req'd especially that much!

fluffysox

This sounds like the conditions of my Nationwide mortgage. I can OP as little or as much as I want because I'm currently on the Base mortgage rate (aka standard variable rate).
if I overpay more than £500 in a month they send me a letter saying my standard monthly payment has been reduced- I love getting these letters. :rotfl:
If you overpay less than £500 you are reducing your mortgage debt but they don't change your standard payment every month. This must happen at least annually though- otherwise the mortgage term would change.
This is Nationwide's default mode so to speak, if you would rather reduce the term then you call them and they keep your basic payment the same.

Although I intend to pay off my mortgage before the scheduled end date of December 2025 (originally it was Feb 2030) I have chosen to reduce the standard monthly payments rather than the term at this point because:
1. I'm an OP addict so money left over from reductions in my standard mortgage bill won't get wasted.
2. I would like to be able to afford pay the mortgage + bills with either my salary or my partners salary if one of us was out of work for any reason
3. Overpayment reserve can be borrowed from at any point- I'm not sure how it works if you've reduced the term.

Anyway hope this helps:D

alanobrien

Go for it, anything extra you can afford to pay over and above your normal payment will reduce the total amount of interest you have to pay them over the term of the mortgage. In other words you should save money long term.

Yes there are those who would argue you can offset the amount owed if you can put the overpayment in savings at a higher rate than the mortgage but that isnt always easy to do.

Just keep focussed its worthwhile, 4 years ago our mortgage was 134k, after a lot of hard work its now 32k. With luck we hope to clear it inside of two years and if we do i estimate we would have saved circa 60K in interest over the full term of the original mortgage and that has to be a good thing !

brooke1

alanobrien wrote: »

Go for it, anything extra you can afford to pay over and above your normal payment will reduce the total amount of interest you have to pay them over the term of the mortgage. In other words you should save money long term.

Yes there are those who would argue you can offset the amount owed if you can put the overpayment in savings at a higher rate than the mortgage but that isnt always easy to do.

Just keep focussed its worthwhile, 4 years ago our mortgage was 134k, after a lot of hard work its now 32k. With luck we hope to clear it inside of two years and if we do i estimate we would have saved circa 60K in interest over the full term of the original mortgage and that has to be a good thing !

thats brilliant

brooke1

hi soz for late reply and thanks for all your useful comments, im so busy it's ashame i dont get much time to go on this useful site.

What

well i now pay £100 per month extra which reduces my term from 17 yrs to 13.8 yrs, but if i was to pay an extra £4oo on top of that it reduces to 7 yrs. What i don't understand is it doesnt seem to reduce it that much by paying all that extra compared to only paying £100 per month.

from what i understand reducing your term and reducing the amount you owe is the same sort of thing.
I haven't been doing this for long as you can all prob tell.