Am I doing the right thing

plinth

Hi All

I have jumped onto this mortgage free idea my current mortgage is £144.450, I have 18 years left fixed for 4 more years at 5.2% due to a family payout I have just received 15k and the bank said I can pay this directly off my capital taking it to £129.450 but im guessing this will save me interest as well!! I have tried to work out the mortgage interest but have no clue, is this the best thing to do and is it worth trying to increase my payments?

If there are any other suggestions could you please let me know or give me anymore ideas of how I could go about reducing this

Thank you

SimbaSimon

plinth wrote: »

Hi All

I have jumped onto this mortgage free idea my current mortgage is £144.450, I have 18 years left fixed for 4 more years at 5.2% due to a family payout I have just received 15k and the bank said I can pay this directly off my capital taking it to £129.450 but im guessing this will save me interest as well!! I have tried to work out the mortgage interest but have no clue, is this the best thing to do and is it worth trying to increase my payments?

If there are any other suggestions could you please let me know or give me anymore ideas of how I could go about reducing this

Thank you

Sounds like an excellent idea. With your mortgage being at 5.2% your very unlikely to get a savings account that'll pay more then that so best thing to do is put it towards the mortgage. If you already have an emergency fund then you may as well put the whole 15k towards the mortgage, if not its the perfect time to set one up! Just check there are no extra fees for paying such a large amount of in one go.

The 15k would come off the balance, but as you say would also save you interest aswell. For example, on a 144k mortgage at 5.2% your mortgage is generating £7488 in interest a year (approximately), so if you were paying £1040 off your mortgage a month, approx £624 of that would be in interest. Now pay 15k off that then the interest on 129k per year is £6708 (approximately), or £559 per month. So if you continued paying the same ammount you'd be paying £65 extra off your mortgage each month.

getmore4less

Check for any payment penaties if you pay a £15k lump sum.

What are the max over payment without penalty

£15k at 5.2% is £780py saving in interest.

To see the effect of payments use a mortgage calculator, I use
http://www.whatsthecost.com/mortgage.aspx

abouttimetoo

Hi

It's unlikely you could get a better savings rate for your £15,000 so I can understand why you are thinking of paying it off your mortgage. I've put the info into the Egg Mortgage Overpayment calculator (there are lots of versions out there) and it shows that if you pay the £15k off your mortgage now it will mean the following

• You would pay your mortgage off 2 years 10 months earlier than planned
• Would save £20,477 in interest

Only you can decide whether it is the right thing to use all or some of the money on your mortgage, do you have any other debts, loans, credit cards etc as they are likely to have a higher interest rate than your mortgage and usual advice would be to pay higher rate debt off first.

You also ask about increasing your payments, for both this and the lump sum repayment you are considering I would have a play with an overpayment calculator, you will find lots of them in the Sticky at the top of this thread. I'm sure you will be amazed at the effect of overpaying in terms of how much interest you can save as well as reduce your term even by overpaying £50 per month which would save you £6452 in interest.

Good luck with your plans

pammyj74

definitely check you will not incur any early repayment charges, most mortgage providers have a limit of only 10% overpayments per year or say only £500 a month. There is one way to get round this and you could possibly reduce your term making your payments bigger but avoiding the ERC but you would need to make sure once your extra money has been paid that you could put the term back up again to where you are comfortable with.

plinth

Thank you all for the advice, I have looked and I can pay 10% off the capital each year so £14,450 I tried to phone RBS to see if I could up my monthly repayments by 10% but they were closed. I think its the best way forward paying the lump sum. I have opened an isa for me and my wife and we have gone about selling all our old mobiles today. See I have been reading around the site there is just so much information and advice on the site its difficult to take it all in. We made £260 today by recycling the mobile phones so the isas a re starting to fill the aim is every year to use this to pay off the mortgage.

We went to currys yesterday and bought 2 freeview boxs as we currently have sky and a multiroom package at £70 per month we have now cancelled sky and that will save us £840 a year that will go into the isa

We went into the loft and through the house yesterday as well and listed around 90 items on ebay to sell coupled with teh fact my wife has quit smoking on friday and is putting the £6 aside a day we did a rough calculation on this and a year the habit was costing £2184 shes doing well. I just need to keep this up and think of new ways to contribute to this we are doing a full overview of our income tonight to see what we can cut or make cheaper. We have never done anything like this its a real challenge and only until you look at the big picture e.g cost of smoking per year it makes you realise

Thank you all very much for your responses

plinth

I have now signed up for one of the survey sites as well lol :j:j

plinth

Hi Again

I have just phoned the Royal bank of Scotland who said that they will charge me 4% on any overpayment I make above the 10% I already have paid. I asked to up the payment from £1022 to £1300 which will cost me 11.12 a month is it worth it?

Kind Regrads