Overpayments in 1st year is it worth it?

karillian22

Oh I do feel an idiot especially when looking into all this stuff!!

Well the good news is I have now contacted the bank and set up a standing order to pay the £30 a month starting today!! If I get any extra each month I hope I can be disciplined enough to use that towards it too!

Thanks for everyone's help in sorting out a numpty in the financial world! I obviously understand that banks are not going to willingly give the advice out!! But you guys have helped me out loads, just need a job earning loads of money now!!:D

drewwa

I have looked at the mortgage calculator on here and what confuses me is that in the first year if I make over payments it doesn't seem to make any difference to the outstanding balance at all. In the second year it will take off a little but it's not until about years 5 and 6 that it makes a real difference. So should I wait till June when the mortgage is 1 year old and start paying off the extra?

The earlier you begin to overpay the better. Overpayment is cumulative. The more you overpay, the more you will save. Because of the effects of interest, the overpayments in years 5-6 onwards appear more effective because the payments you made in earlier years have already had some time to work on the capital outstanding. If you don't start paying until years 5-6, the payments at that point in time will have the same small effect as they do in years 1-2.

Everything you overpay will make a difference.

Cheers,

Drew.