Overpayments didn't reduce mortgage length

ylesia

Jonbvn wrote: »

Why year 5?

In case 3 you overpaid by 300 x 147.42 = £44,226.00

Given that you have overpaid by more than twice as much, of course you will pay less interest.

I didn't check the figures before my post, just assumed that Mortgage 3 was overpaying 20% (£25,000) over the term. The above makes them even less comparable.

Kaz2904

I have been overpaying my mortgage for the last 4 years and I get yearly statements with the end date remaining the same. I haven't reduced the term on my mortgage either but I pay by standing order so I control the amount I pay each month.
Eventually I won't owe any money so I won't pay any more. That will be in 3 years (hopefully!) not 13 years as originally planned.

If you are able to then why not pay by SO and then the ball's in your court?

Jonbvn

Kaz2904 wrote: »

If you are able to then why not pay by SO and then the ball's in your court?

I use Internet banking to OP. I can pay into the mortgage 24/7/365. I can see how much is outstanding whenever I want online.

mintedmatty

ylesia wrote: »

I didn't check the figures before my post, just assumed that Mortgage 3 was overpaying 20% (£25,000) over the term. The above makes them even less comparable.

You wouldnt pay £147 the full 300 times? by overpaying monthly you would pay the mortgage off earlier? Whether it would save more than in example 2 im not sure?

mintedmatty

Jonbvn wrote: »

I use Internet banking to OP. I can pay into the mortgage 24/7/365. I can see how much is outstanding whenever I want online.

Im looking forward to july when out of my fixed deal, any spare cash week by week i can simply pay onto my mortgage and pay as often and as much as i wish?

MORPH3US

Geez guys, it was just a couple of examples....

Please feel free to calculate your own and post them up if I have not done it to your liking...... :silenced:

pammyj74

Surely it doesnt matter about the actual figures just that they are comparing which one is the better way to do. If the figures arent that far off its still the same outcome isnt it?

pammyj74

MORPH3US wrote: »

Mortgage 3
£125,000 over 25 years at 5.09%
LUMP SUM OVERPAYMENT of 20% (£147.42) per month to reduce term
Total capital repaid = £125,000.00
Total interest paid = £66,154.48
MORTGAGE 2 GRAND TOTAL REPAID = £191,154.48
Saving of £30,037.64 over mortgage 1
Saving of £21,734.67 over mortgage 2

So reducing the term here, paying the exact same MP + OP, how many months does that reduce it by?

OneAimMan

I think keeping the term the same is probably better and reducing the monthly payments.
Remember the reduction in the payments per month are going straight back towards overpayment(or so they should be!) so your always reducing the actual loan amount. That's the key, the loan amount is reducing either way. What am not sure is if you call your bank and reduce the term, would they let you push it back up to original term if you came into some hard ship and wanted to reduce the payments again?!

pammyj74

I think for me it a mental thing, in that I feel better reducing the term and thinking I only have 10 years instead of 20.
I know that doing it either way it will be finished at the same time.