Is it really worth while overpaying my mortgage?

AnotherJoe

OXFORD_SMOGGY wrote: »

What about house value, not as simple as that, as you will have more equity in rising house prices

£10,000 equity in my house now could be worth £10,000 in 10 years time plus interest saved on mortgage.

In comparison to £500 interest in savings over ten years that would be £5,000

You are double counting all over the place and comparing things that shouldn't be compared.

It doesn't matter if the £10k equity is in your bank, or involved in owing less to the bank, it comes to the same thing. eg lets say you owe £90k to the bank on a £200k house, or you owe £100k to the bank but also have £10k in savings. Same amount of equity.

Except that in the first case every year you are saving £10k x (say) 2% mortgage rate that you are not paying, eg £200 a year, whereas if you kept that £10k in savings you are gaining £10k at (say) 5%, eg £500. So you are £300 a year better off to keep it in savings at that differential.

And its your whole house that rises in value, not portions of the equity in it.
If you have a £200k house on a 100% mortgage and it rises to £400k, you now have £200k more. If instead you had a £200k house with a £100k mortgage and it doubled, you still only end up with £200k extra (eg you had £100k now you have £300k)

elliebee

my current rate is 2.59%

pete-20-11

You also need to think about the LTV (loan to value).

When your fix comes to an end, and you re-mortgage, any overpayments you have made may have brought you into a different LTV bracket - therefore you get a better deal on that re-mortgage.

Caz3121

elliebee wrote: »

Until I work out that paying an extra £148 per month, for 170 months will cost me £25,160

that is correct, but in turn saves you paying £352 for a further 96 months = £33,782 which is where the £8k saving comes in

[Deleted User]

pete-20-11 wrote: »

You also need to think about the LTV (loan to value).

When your fix comes to an end, and you re-mortgage, any overpayments you have made may have brought you into a different LTV bracket - therefore you get a better deal on that re-mortgage.

But you can achieve that by simply using the extra cash in your account to lower your LTV, but have gained the interest in the meantime.

upoiupou

elliebee wrote: »

my current rate is 2.59%

Haven't you posted in a different thread that this is an offset mortgage and the whole amount is offset by savings so you're paying no interest at all?

If so, then the rate on your mortgage is 0%, to compare with the rate you would get on savings.

ViolaLass

upoiupou wrote: »

Haven't you posted in a different thread that this is an offset mortgage and the whole amount is offset by savings so you're paying no interest at all?

If so, then the rate on your mortgage is 0%, to compare with the rate you would get on savings.

The rate on savings is what the savings could achieve elsewhere (to see whether it would be worth adding them to the mortgage).

chelseablue

Im overpaying because I owe £228,000 :rotfl:


And because when I want to move it'll hopefully give me more equity to use on the next house

elliebee

upoiupou wrote: »

Haven't you posted in a different thread that this is an offset mortgage and the whole amount is offset by savings so you're paying no interest at all?

If so, then the rate on your mortgage is 0%, to compare with the rate you would get on savings.

This was for a different mortgate

getmore4less

upoiupou wrote: »

Haven't you posted in a different thread that this is an offset mortgage and the whole amount is offset by savings so you're paying no interest at all?

If so, then the rate on your mortgage is 0%, to compare with the rate you would get on savings.

that's not how it works.

100% offset is not 0% rate it is borrowing £0

The effective rate mob are deluded.