Question...

Vikipollard

Hi,

Apologies if this is in the wrong section. Wasn't sure if it should be in the MFW part...:o

We are in the (fortunate) position of having paid off all our debts/loans etc with the exception of our mortgage. This is with Leeds and Holbeck and is on what I think is SVR of 6.59%. Does that sound about right? We have never tarted around with fixed deals since the original two year one ran out, mainly because I don't understand enough to be sure I wasn't getting it wrong.

The amount owed when we had the last statement (March) was c.£43,000 and had 15 years to run.

My question is are we better to overpay say £400ish per month or should we pay a lump sum of £4k once per year? For the life of me I can't work out which will save us more money in the longer term.

Apologies if this is just me being stupid, and thank you in advance for any replies.

R_P_W

Remortgage off that rate ASAP as its terrible

ch3101

Once you've remortgaged pay as much off the loan as soon as you can, hence saving more interest.

kingstreet

I agree with RPW.

Get off that rate asap.

In answer to your direct question, the answer depends on how your interest is calculated.

If it's monthly, or daily, make overpayments as often as you can. If it's annually, save the money and only pay it to the mortgage a week or two before the annual recalculation date.

Imma_Number

Do you really mean a lump sum of £4000 or 12x400 = £4800?
Also it matters if the lump sum is built up over the year from your £400 savings or comes in at some point as a bonus.
Also is the interest on the mortgage calculated daily, monthly or annually?
Any Early Repayment Charges?

Assuming it's all made up £400 lots from monthly incomings and the interest is accrued daily or monthly and no ERCs then it's better to pay the £400 each month.

£43000.00 @ 6.59% for 15 years (180 months) effectively starting in March 2013
Calculator says monthly repayments of capital and interest = £376.71
So:
April: 42859.43
May: 42718.10
June: 42575.98
July: 42433.09
August: 42289.41
So we'll start with August's £42289.41 @ 6.59% for 175 months (C&I still £376.71)

Not overpaying:
End of Mortgage: Mar 2028.
Total interest between now and EOMort £23634.30
Total paid no OPs: £65924.25

Overpay Yearly at end of year (ie 4Kpa starting Aug 2014)
End of Mortgage: Nov 2019
Total interest between now and EOMort: £9955.03
Total paid inc OPs: (6*4000)+(73*376.71)+368.13 = £51867.96

Overpay Yearly at end of year (ie 4800pa starting Aug 2014)
End of Mortgage: Aug 2019
Total interest between now and EOMort: £9050.05
Total paid inc OPs: (5*4800)+(70*376.71)+593.27 = £50962.97

Overpaying Monthly @ £400pcm
End of Mortgage: Jan 2019
Total interest between now and EOMort: £8093.67
Total paid inc OPs: (63*(376.71+400))+673.84 = £49606.57

Calculated using: http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx
(The inputs and results show as $ but that really doesn't matter it's the numbers that count)

Hope that helps
Imma

PS: As the others have said: If you can get off that rate and on to a lower one, so much the better. The best monthly repayments won't be below £238pcm (0%) ie £43000/180months

Imma_Number

Kingstreet, as first port of call would you recommend to VikiPollard to say to Leeds, "This rate's rubbish, what can you do for me?"

Leeds' current SVR is 5.69%
I just looked it up.

Based on SVR of 5.69% (somewhat mess up my figs above )
Monthly payments now £355.70
Overpaying Monthly @ £400pcm (starting Sep 2013)
End of Mortgage: Feb 2019
Total interest between now and EOMort: £6950.99
Total paid inc OPs: (64*(355.70+400))+64.47 = £49184.97

kingstreet

I'd suggest contacting the existing lender to request details of any customer retention products which may be available, whilst at the same time researching possible remortgage options as an alternative.

Once a full picture is known, an informed decision is possible.

Vikipollard

Thanks for the help everyone, I'm grateful.

Dug the statement out and the interest is applied annually. Had a chat with one of the advisers (not about the rate as OH not here to be part of the decision making process) who said it would be better for us to pay a lump sum (min £1000) up to 10% of the capital as that would reduce the interest we'd be charged. Apparently it wouldn't if we overpaid monthly. Will set up a separate account for the lump sum savings and split the £400 off from what I save each month into that.

Now to tackle the rate....