Use a Loan to overpay Mortgage?

Cornucopia

There is some psychology to overpayment, and for some people, biting big chunks off a large debt (even if that's supported by short-term borrowing) is more pleasing than a steady trickle of small over-payments (and therefore more likely to get done).

I think the loan idea is a reasonable one, but I would be looking at 0% on purchases credit cards to support the overpayments, possibly moving that debt onto 0% balance transfer when it becomes due for payment. i.e. stoozing to support mortgage overpayments.

(0% on purchases offers tend to be completely free, 0% on BT offers tend to have a one-off fee of 2.5-3%, although there are sometimes offers below that).

nidO

willtt wrote: »

Just to add some more figures, so I owe approx £115,000 and have 23 years remaining at a rate currently fixed at 2.19%. I understand using the over payment calculator to see the interest savings over the entire mortgage but I am not sure how to use it to compare the interest savings just over the 60 months instead?

There is a much more in-depth calculator than the MSE one which can factor in one-off payments at later dates, varying amounts of overpayments for certain numbers of months, and interest rate changes, at:

https://www.drcalculator.com/mortgage/uk/

Landofwood

Starting Balance: £115k
Term Remaining: 23 years

Balance Remaining after 5 years
No overpayment: £94,670
One-off 10k lump sum: £83,535
Regular £180pcm payments: £83,268

willtt

Cornucopia wrote: »

There is some psychology to overpayment, and for some people, biting big chunks off a large debt (even if that's supported by short-term borrowing) is more pleasing than a steady trickle of small over-payments (and therefore more likely to get done).

I would certainly agree with this, seeing an immediate difference in what I owe is very appealing however choosing the greatest saving option has to be the sensible choice.

I would like to thank all the contributions once again for making the choice clearer.

silverwhistle

Landofwood wrote: »

One-off 10k lump sum: £83,535R

Plus interest cost on loan, or am I getting confused too?

silverwhistle

Incidentally, years ago when I had a mortgage (with Britannia) interest was charged at the end of the year so it made sense to do a lump sum overpayment then. Check your terms but if you're allowed to do it 12x180=2,160 and you might even be tempted to round it up if you've had a good year.

Landofwood

silverwhistle wrote: »

Plus interest cost on loan, or am I getting confused too?

Yep plus interest