Should I overpay before or after remortgaging?

vickisprings

I am on a 5 year fixed rate deal of 5.58% until August 2012, and will be looking for a better deal when it finishes.

Until that happens, I have the option with my current mortgage to overpay monthly by £500. This would reduce my monthly payment by a few pounds every month, so if I kept the current mortgage then I would eventually repay early.

BUT - as I'm not planning to keep it, is it worth overpaying for the next 10 months? Sorry, am not good at maths, but paying £500 each month to reduce my monthly payments by a few pounds on a product that I won't see through to the end doesn't seem to make sense.

Should I save the £5000 and use it to borrow less when I do remortgage next year?

many thanks for any help, this is bothering me and I can't work it out.

getmore4less

When you come to remortgage your debt will be £5k less + a bit of saved interest.

There should be an option to keep the payment the same.

whats the followon rate? might not need to change.

vickisprings

Thanks GM4L. So does an overpayment go to pay off the lump sum (and in doing so reduces the monthly interest payment) it doesn't just pay off the interest? in which case it is worth me overpaying even I am thinking of remortgaging.

After August 2012 I go onto 'base mortgage rate' which for Nationwide seems to be 2.50%.

My mortgage includes repayment of interest only for £91k and the rest is repayment. Current total is £157k.

dark^knight

Overpaying will reduce your lump sum, and therefore will reduce your monthly payment as well.

heathcote123

vickisprings wrote: »

I am on a 5 year fixed rate deal of 5.58% until August 2012, and will be looking for a better deal when it finishes.

Until that happens, I have the option with my current mortgage to overpay monthly by £500. This would reduce my monthly payment by a few pounds every month, so if I kept the current mortgage then I would eventually repay early.

BUT - as I'm not planning to keep it, is it worth overpaying for the next 10 months? Sorry, am not good at maths, but paying £500 each month to reduce my monthly payments by a few pounds on a product that I won't see through to the end doesn't seem to make sense.

Should I save the £5000 and use it to borrow less when I do remortgage next year?

many thanks for any help, this is bothering me and I can't work it out.

Unless you can find a bank that will pay you a worthwhile amount over 5.58% after tax on your spare 500pcm (and if you can, do let us know!), you're going to be better off putting it into the mortgage.

As a bonus, the lower the outstanding capital after that 10 months, the better chance you have of getting a better mortgage deal (5.58 is awful!), the fact the bank can see you can afford to overpay and are therefore a better risk may also contribue to you getting a better deal.

vickisprings

Thanks dark^knight and heathcote123.

Yes 5.58% is not good! arranged a 5 year fixed mortgage in may 2007 when the base rate was 7.24 and rising so it looked a good deal! then the housing market dropped a few months later..... Looking forward to getting a new deal next year, wonder what the rates will be like come August 2012?

lulabelle1

I took my fixed at the same time as I think you took yours as I revert to Nationwides BMR too next Summer. To be honest, the BMR at 2.5% is fantastic so not sure why you would be looking to sign up to a new product........?
Overpay £500 every month if you are able, your capital owing will reduce which is always a good thing. Plus, with Nationwide you can take back you overpayments any time you like without having to give a reason.......

originator

I did too and my fixed rate is 5.78%! Can't wait to get on that BMR.

dimbo61

So for the next 10 months overpay by the £500 a month allowed ?
Next August when you drop onto the BMR you may be better off by building up savings in cash ISA,s

sarahevie

I feel your pain too 5.99% with halifax in Nov 2007, can't wait to get out next Nov:rotfl:

I've been overpaying as we hope to sneak into 70% LTV despite price falls