knocking years off your mortgage

brooke1

i forgot to mention aswel that my mortgage provider don't seem to know too much about this subject and don't really want to offer any advice on this matter, i take it that they don't like the idea, lol

cake21

brooke1 wrote: »

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.

Congratulations on getting started, that's the hardest part and then it gets addictive

No idea really why the effect is reduced, maybe because the first overpayments are paying off more/all of the interest which is what stops the balance going down?

themull1

How do you overpay, do i just go into nationwide with the money and say i want to make an overpayment? and say to reduce the term not the payment amount?

Jonbvn

brooke1 wrote: »

i forgot to mention aswel that my mortgage provider don't seem to know too much about this subject and don't really want to offer any advice on this matter, i take it that they don't like the idea, lol

Of course they don't offer advice on this issue! They are in business to make money.

As the original raison d'etre for this site states, the banks are not your friend.:money:

adwat

To give you an idea of the sort of savings you can make by overpaying here are some figures.

This is based on a £100k mortgage at 5% taken over 25 years:

Overpaying by £100 per month saves £21k in interest and reduces the term by 6 years.

Overpaying by £200 per month saves £32k in interest and reduces the term by 9 years 9 months.

Overpaying by £300 per month saves £40k in interest and reduces the term by 12 years.

Overpaying by £400 per month saves £45k in interest and reduces the term by 14 years.

Overpaying by £500 per month saves £49k in interest and reduces the term by 15 years.

As you can see you get more "bang for your buck" with the smaller repayments, so it's up to you to decide how much you can afford, as any overpayment is better than none. My advice would be to make out a budget and see what you could afford to overpay. Be warned though, when you start to see the balance reducing it becomes addictive:D

MrsManda

brooke1 wrote: »

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.

If you use the overpayment calculator posted by tiff you can model the effect that overpaying different amounts have. It's not just a case of reducing the term but by reducing the term you are paying a lot less in interest so the overall repayment amount is lower.

brooke1 wrote: »

from what i understand reducing your term and reducing the amount you owe is the same sort of thing.

It is, but if you overpay your mortgage you are often given the option of reducing your monthly payments - so your term stays the same but you have to repay less each month. You save less money overall by reducing your payments but it can be a useful option if you have difficulty finding your current monthly payments each month.

Hope this makes sense.

MrsManda

themull1 wrote: »

How do you overpay, do i just go into nationwide with the money and say i want to make an overpayment? and say to reduce the term not the payment amount?

You can do a bank transfer, or make a payment over the counter/via telephone banking.
Make sure you check the T&Cs of your mortgage as you may be incur charges if you overpay by too much in a given month.

If you overpay by £500 you will automatically get your monthly payment reduced but you can request that they reduce the term instead.
Have a look at the link below for T&Cs and how to overpay

http://www.nationwide.co.uk/mortgages/existingcustomers/overpayments.htm