Flexible tracker - quickest way to get it down

littlesthobo_2

Hello all

I've just switched mortgages from an Alliance & Leicester fixed rate to C&G flexible tracker. My mortgage is £79k, and I'm about to put in a lump overpayment of £2.5k. I can use this to either

1. reduce the monthly payments or

2. reduce the term (23 years at present) or

3. let the overpayment sit there reducing the amount of interest I pay, and enabling me to make any underpayments up to £2.5k if I need to in the future

I'd like to keep ploughing away with the regular payments and make as many overpayments as I can as I get extra cash. As I'm being a bit thick I can't work out which of the above is most likely to enable me to get the balance down fastest (although I imagine 1. is not the way to go.)

Any responses would be much appreciated.

Many thanks.

pointypenguin

Hi

1) This will not help you pay the mortgage off any quicker hence lots of extra interest accrued

2) and 3) are essentially the same. As either way you will reduce the term and the amount of interest paid. The question is will you need that money at any point in the near future?

IveSeenTheLight

pointypenguin wrote: »

Hi

1) This will not help you pay the mortgage off any quicker hence lots of extra interest accrued

2) and 3) are essentially the same. As either way you will reduce the term and the amount of interest paid. The question is will you need that money at any point in the near future?

Pointy Penguin is right, 2 & 3 are the same, just flexibility with 3 that you can regain access to the money thus not reducin gthe term.

My suggestion would be to take option 2, take away that risk you can take the money back out. It would be nice to have that safety net but the interest you save by putting the money away is much more valuable.

Doing some quick calculations, you have a 79k mortgage with 23 years left to pay.
You have not mentioned the interest rate so I will assume 6.01%
This means your monthly mortgage is approx 528 pounds.

Paying 2.5k in now reduces your term by 1 1/2 years (its amazing how much compound interest you save)

P.S. if you could find another 130 pounds per month to put away (pay 650 pounds per month into your mortgage) on top of your 2.5k overpayment you would reduce your term to approx 15 years instead of 23 :cool:

littlesthobo_2

That's great, thanks very much to both of you.