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Overpaying confusion! Help please
themadmonk82
Posts: 3 Newbie
It's pretty simple this one, or at least I hope it is -
Should I keep overpaying on my mortgage even though I have my house up for sale and hope to sell it within a year or so (With any luck)?
I'm thinking that I should not because whatever I overpay I will not recoup in full when selling. I mean that the amount that I overpay by will not be the same as the amount at which the mortgage debt is reduced, due to interest.
Am I being stupid?!
Should I keep overpaying on my mortgage even though I have my house up for sale and hope to sell it within a year or so (With any luck)?
I'm thinking that I should not because whatever I overpay I will not recoup in full when selling. I mean that the amount that I overpay by will not be the same as the amount at which the mortgage debt is reduced, due to interest.
Am I being stupid?!
0
Comments
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As the mortgage balance reduces less interest is charged. If the interest rate charged on your mortgage is higher than you can earn on savings. Then overpaying is the better option.0
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But surely this is different if we are talking short term i.e with a view to selling in the near future.
For example if I were to overpay by £1000 this year and then sell at the end of the year, my mortgage would not reduce by £1000, therefore I would make less than £1000 more profit than I would have without the overpayment. So surely I would be better off keeping that £1000 and putting it towards my deposit for new house???!!
Does anyone understand what i'm getting at??
I totally understand why overpaying is a good thing in the long term, but surely this all changes once you have your house for sale and hope to sell it soon.0 -
But you would be charged interested on the £1000 you havnt paid off.
The £1000 wouldnt come off your mortgage no, only a percentage of that would. But if the interest in your bank is lower than that on your mortgage and presuming you have no penalty charges for overpaying you are better off paying it towards your mortgage.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
themadmonk82 wrote: »Does anyone understand what i'm getting at??
No.
Take a look at your annual mortgage statement from your lender. See how your balance reduces ever month as the payments are made and interest reduces.0 -
Many thanks ACG, I had not considered the interest on the unpaid part of the mortgage. I knew I had to be wrong in my assumption but just could not work out why!!
What an excellent service!!0
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