Advice on paying down mortgage

[Deleted User]

Going back to overpaying the fixed rate part of my mortgage (deal ends Aug 2016) ; would I save money by accepting the 3% penalty as the interest rate is 4.64%?

Thank you! :-)

PeacefulWaters

Missu wrote: »

I really want to pay my mortgage down so that I own my home by the time I retire. As it is, my mortgage will run 3 years into my retirement and I'm trying to avoid using my pension lump sum to clear it.

Two thoughts.

1) ask them to reduce the term.

I'm on a relatively high salary

2) pay more into your pension. Tax relief at your highest rate.

[Deleted User]

PeacefulWaters wrote: »

Two thoughts.

1) ask them to reduce the term.



2) pay more into your pension. Tax relief at your highest rate.

Thank you for the reply.

I don't know if you've read the thread up to here but I decided not to reduce the term.

I'm in a final salary pension so my decision was to pay down the mortgage hence my last question about taking the 3% penalty over the higher interest rate.

getmore4less

Missu wrote: »

Going back to overpaying the fixed rate part of my mortgage (deal ends Aug 2016) ; would I save money by accepting the 3% penalty as the interest rate is 4.64%?

Thank you! :-)

The way I normally do this, which I don't think is 100% right but have not been bothered to analyse in detail, is.

Take £103.

say you can get 1.5%(net) in a savings account. that's (103*0.015/12) 12.865p per month

pay £100 off the mortgage paying the £3 penalty you save (100*0.0464/12) 38.667p per month.

3 / ((100 * 0.0464 / 12) - (103 * 0.015 / 12)) is 11.6 so 12 months to break even


1.0% 9.9 ( 10 months)
0.5% 8.7( 9 month)
0.0% 7.7( 8 months)

So any overpayments that have a penalty up to around the end of 2015 should save a bit of interest.

Does the 3% penalty change to a lower rate as you get closer to the end of the deal if it does that complicates the numbers.

I know you plan to this off but I will try again

You have some interest free money available that would also be beneficial redirected at the mortgage.

If interest rates move or you can find a decent return on some of the money, have a look at monthly savers and some fixed term products, then it will need another look.


Consider changing the term maybe not as low as 3years but if you can get the contractual payment up you save those 3% penalties.

[Deleted User]

getmore4less wrote: »

The way I normally do this, which I don't think is 100% right but have not been bothered to analyse in detail, is.

Take £103.

say you can get 1.5%(net) in a savings account. that's (103*0.015/12) 12.865p per month

pay £100 off the mortgage paying the £3 penalty you save (100*0.0464/12) 38.667p per month.

3 / ((100 * 0.0464 / 12) - (103 * 0.015 / 12)) is 11.6 so 12 months to break even


1.0% 9.9 ( 10 months)
0.5% 8.7( 9 month)
0.0% 7.7( 8 months)

So any overpayments that have a penalty up to around the end of 2015 should save a bit of interest.

Does the 3% penalty change to a lower rate as you get closer to the end of the deal if it does that complicates the numbers.

I know you plan to this off but I will try again

You have some interest free money available that would also be beneficial redirected at the mortgage.

If interest rates move or you can find a decent return on some of the money, have a look at monthly savers and some fixed term products, then it will need another look.


Consider changing the term maybe not as low as 3years but if you can get the contractual payment up you save those 3% penalties.

Thank you again your figures are really helpful.

I know you may think I'm not doing the right thing but my priority is to clear the credit card balance followed by reducing my mortgage.

I don't want to shorten the term because of job security/pressure of work so may have to take part time in the future. I'm fit and well now but who knows.

I don't need to add anything to my pension pot as I'm in a good position there.