Mortgage interest calculations and overpayments

ViolaLass

Katykat wrote: »

Jumping on the back of this post, could anyone throw any light on this one? My daughter has 8 yrs left on her mortgage & is trying to pay it earlier. She has no disposable income once she has paid her bills on the first day of each month. If she paid ( say 1st June for eg) and then started paying 25% of her mortgage every week, always in credit, would she then pay her mortgage earlier because of the daily interest charge?

There's a contradiction there. If she doesn't have disposable income after bills, how can she overpay her mortgage at all?

Katykat

ViolaLass wrote: »

There's a contradiction there. If she doesn't have disposable income after bills, how can she overpay her mortgage at all?

I would pay her normal monthly payment on 1st June, then she would start paying weekly payments from then on. She would still only be paying the same amount each month, but because she is paying it before it's due, surely it would reduce the interest charge. Maybe not hugely at first, but over time shouldn't it make a difference?

enjoyyourshoes

Your mortgage interest is 1.97%

You could earn higher interest on savings, either one of the interest paying current accounts (5% TSB) or a regular saver (6% HSBC advantage account of First D)

This may prove beneficial and then have bigger lump sums available if interest rate on mortgage changes dramatically ?

Only a thought

SternMusik

Katykat wrote: »

I would pay her normal monthly payment on 1st June, then she would start paying weekly payments from then on. She would still only be paying the same amount each month, but because she is paying it before it's due, surely it would reduce the interest charge. Maybe not hugely at first, but over time shouldn't it make a difference?

The savings will be pennies. Essentially she is making an overpayment of one month worth of payments, but not all at once since she wants to do it weekly? And she wants to continue making payments weekly? Her mortgage company may not agree to this.

Rather than messing with mortgage payments for the sake of pennies, your daughter could switch to one of the high interest paying current accounts where her salary will attract interest until she hands some of it over to the mortgage company every month.

The only way to bring the mortgage balance down quicker is by paying more than the contractual amount.