Timing mortgage overpayment

user15

Say if you have a £200,000 mortgage with 25 years remaining at 4%, and you can overpay up to 10% of your mortgage balance as at the start of each year.




Say if I want to make the full £20,000 overpayment, does it matter if I make the overpayment in January or December?


How much of a saving if any, would I be making if I made the overpayment of £20,000 at the start of the year instead of the end of the year?

Canary_Yellow

Pay it this year then you can overpay again next year.


EDIT: Just realised that wasn't really your question.


At a rough guess, I would expect it would save you about £1,000 paying it at the start of the year rather than the end of the year.


I will try and work it out now...


EDIT 2: Using this http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator#results I think it's about £700

kingstreet

How/when is interest calculated?

If daily/monthly pay it as soon as you can.

If annually, pay it a week before the end of the year and benefit from a year's interest where the money is now as you'll get non benefit from the mortgage overpayment until the anniversary.

Canary_Yellow

Kingstreet - am I right in thinking that daily (or at least frequently) is the norm, as opposed to annually?

getmore4less

£20k * 0.04 = £800 thats the max you can save in a year from the overpayment.

If you can keep your payment the same you benefit a bit more

eg £200k @4% over 25y £1058pm

over 1 year you pay £7,913 in interest and owe £195,217.

£180k you pay £7,098 in interest and owe £174,402

The £20k sees you £815 better off