Early repayment discussions

Jayr0706

I have recently been looking at overpaying on my mortgage after looking on a number of early repayment calculators I have noticed that if I overpay by £100 pounds I will save x amount on interest and shorten my term by x amount of years but if I double that payment to £200 I don't save double the interest saved or double the number of years that my term is shrtened by, why is this? Thanks in advance for any help

foxy-stoat

Just the way it works - doubling the overpayment wont mean you double the saving in interest and time off your mortgage term.

getmore4less

£100k @ 3% £500pm £38,803 278m
£100k @ 3% £600pm £29,521 216m
£100k @ 3% £700pm £23,868 177m

The reason it works like this is the amount of capital from the payment goes up the shorter the term.

To demonstrate another way

£100k over 30years the capital in the first 5 years of payments is around £170-£200pm that means a £100pm over payment knocks a month off ever 2 payments+a bit towards the net one.

For a 20 year mortgage the first 5 year the capital is £300-£350pm so adding £100 take 3 payments to knock a month off

(It is slightly more complicated than that but that's the basic reason)