Help with calculations please

ThriftyWanabee

Hello. I'm relatively new here and as I'm moving house and it's the start of a New Year I want to get organised and get my mortgage paid off as soon as possible.

As I'm currently on a fixed rate mortgage I'm transferring my exisiting mortgage when I move, the mortgage is for £55,035 for 18 years at a fixed rate of 4.99% until 31 May 2012.

My monthly payments £386.62.

I'm a little confused with regards to overpaying...my agreement states:

During the period when an early repayment charge applies, you can make overpayments up to 10% of the outstanding balance each calendar year (using the balance as at 1 JAnuary of the year in question or, in the year in which your loan is made, the original balance) and the charge will be waived.

Please can someone explain what this means? I know I may just sound stupid but I just find that all this paperwork is never written in plain English and my maths skills are far from good, so can anyone tell me how much I can overpay by and how long it should take to pay this mortgage off if I can overpay by the maximum amount allowed each year.

Thanks in advance for your help.

alex_p

What that means is you can only overpay 10% per year during the period when the early repayment charge applies - which is usually during the fixed part of the mortgage.

So if it's your first year you can pay 10% of £55,035 which is £55,035 * 0.1 = £5,503.50. If it's not your first year you need to take the balance at 1st Jan as it says and work out 10% of that.

Best thing ring them up and say "how much can I overpay this year without incurring a penalty?" Then they tell you the amount and you can overpay it if you want. Easy.

Working out how long it would take is a bit tricky and you would need a mortgage formula and a spreadsheet.

ThriftyWanabee

alex_p wrote: »

Working out how long it would take is a bit tricky and you would need a mortgage formula and a spreadsheet.

Can anyone give me a rough idea how many years?

MrsManda

ThriftyWanabee wrote: »

Can anyone give me a rough idea how many years?

Put your details into here
http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator#result
to get an idea - I think it works out as paying off your mortgage in 8 years if you overpay by 10% each year.

ThriftyWanabee

If my fixed rate mortgage is up on 31/5/2012 does that mean if I remortgage I could pay off a lump sum without incurring any penalties?

amancalledmartin

Probably. The repayment charge usually only applies during the fixed rate period (i.e. up to 31st May 2012). That's just to stop people hopping from one fixed rate to another and it's the gamble you take when you settle on a fixed rate that there won't be a better one come along in the next 12 months.