Should I pay off my mortgage discussion

BillyWilly_2

Hi,

To all thinking of overpaying monthly.

I was advised to save my overpayments for say 3 months and pay it in lump sums. Something to do with the interest being calculated at the end of the year with overpaying monthly whereas the lump sum should reduce your mortgage immediately.

Does this sound right to anyone in the know?

Thanks in advance...

SHEN_2

Hi I've recently reduced the term of my mortgage to pay it off within 6 years instead of 10. I'm not currently allowed to make any over payments to reduce the capital (because of particular deal I'm on). Would it have been better to keep mortgage term at 10 years and save the additonal money I'm now paying to reduce the term and make a payment off the capital when deal ends?

RosieTiger

That depends on your deal. Most mortgages calculate interest daily, so the earlier it's pai in the better.
Like with anything on this subject it always pays to check with your lender as their deals will differ.

Thrugelmir

RosieTiger wrote: »

That depends on your deal. Most mortgages calculate interest daily, so the earlier it's pai in the better.
Like with anything on this subject it always pays to check with your lender as their deals will differ.

Some older mortgages and a few lenders still offer an annual interest option.

If this is the case pay off the mortgage as close as you can to the end of the year not after.

As you'll receive no benefit by making payment early.

Thrugelmir

SHEN wrote: »

Hi I've recently reduced the term of my mortgage to pay it off within 6 years instead of 10. I'm not currently allowed to make any over payments to reduce the capital (because of particular deal I'm on). Would it have been better to keep mortgage term at 10 years and save the additonal money I'm now paying to reduce the term and make a payment off the capital when deal ends?

Maintaining the mortgage term as is, gives you flexibility. Once shortened far more difficult to re-extend the term again.

As you say find the best available account to deposit your funds in until the fixed term expires.

dell33

Can someone offer me some advice please. My DH is part of the save brigade, where as I want to pay off Mortgage.

Our Mortgage payments are around 13,000 pa. It would take £88,000 to clear mortgage. DH reckons it would be over 6.5 years before we would be up anymoney. How can I bring him around to my way of thinking. This wont be happening soon as we have the money tied up in saving scheme at the moment but just want to work on my argument.

michaels

I think their are two biggies not included in this basic model that should be highlighted:
1) Tax credits
If you are on tax credits and earn more than £300 interest per year (outside ISAs) then the interest will result in a withdrawal of tax credit at the rate of 41p in the £ on top of any tax on the interest so an effective rate of 61% for basic rate tax payers!!!
2) Re-mortgaging
Using saying to pay down a mortgage may allow a lower ltv band on re-mortgage which is likely to have a much grater impact on the mortgage rate and hence total interest cots than any earnings from savings interest.