Paying extra on your mortgage. When does it become worth it?

bigmondy

For example - paying £40 per month extra on a £94k mortgage with 16 years to run - only reduces the term by 2 months!

Surely there is no point in paying the extra £7,680 when you will only be saving around £1,400 for the 2 months you will be losing?

I based this on a YBS mortgage with a fixed rate of 3.79% - and this was what I was told by them on the phone - I don't get it.

pjcox2005

Maybe worth playing with the mortgage calculator on the main site.

http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator#result

With those figures it suggests you would pay off 1 year and 3 months early and save £2,659 in interest.

Yorkie1

Are you sure that's a correct figure?

I input your details into the mortgage overpayment calculator on this site - and it says it would save you £2659 and pay the mortgage off 15 months sooner.

Edit: snap!

bigmondy

That was what the girl on the phone told me - she didnt sound to "sure" if you know what I mean.

I will give the calculator a try - thanks guys.

Thrugelmir

bigmondy wrote: »

For example - paying £40 per month extra on a £94k mortgage with 16 years to run - only reduces the term by 2 months!

Is that based on the fixed term of the mortgage you are currently in, rather the entire mortgage term?

dimbo61

The first mistake you made was thinking that the staff in the bank/building society can work out how an overpayment of £40 a month would make on a £94K loan over 16 years.
Use one of the online calculators yourself and YES any overpayment is worth paying to get rid of the mortgage early .
For example I overpaid our mortgage by £500 a month and this reduced the term from 22 years down to 10 years and this saved me £50,000 in interest
So if you can overpay

bigmondy

Good advice folks. Appreciated.

Oh and Thrugelmir - I think you have cracked what she has done. She has calculated it on my 3 year fixed term....... now that is definitely NOT what I asked her to do.

Anyone would think the BS doesnt want us to overpay...... surely not.

Thrugelmir

bigmondy wrote: »

Oh and Thrugelmir - I think you have cracked what she has done. She has calculated it on my 3 year fixed term....... now that is definitely NOT what I asked her to do.

Unlikely the online calculator would have supplied the figure. As the post fixed period is an unknown rate.